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Building Blocks of MFI 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks  Practical Microfinance Course, Ses...
Session 3: assignment <ul><li>Preparation for Session 4 and Your MFI case study </li></ul><ul><li>Read Power Point handout...
Session 3  Assignment : Read through  ‘ Building Blocks for starting a basic microfinance programme ’ <ul><li>Research </l...
THINK of the Country/Region 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
1. Environment Scanning Research  18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
Before preparing your proposal 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks  List 7 KEY information poi...
18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
3. Market research 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
4. Design of Products & Methodology 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
<ul><li>Loan of $100; Flat rate interest Charged 20%. Repayable over 12 months by monthly instalments. </li></ul><ul><li>T...
5. Demand & Marketing Plan 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
LOAN PORTFOLIO (EXCEL FILE 1) 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks  ASSUMPTIONS Year 1 $ Year 2...
6. Organisation 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
18/05/11 Practical Microfinance Session 3/7: MF Building Blocks  Organisation chart & Governance
7. Implementation and Work Plan 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
8. Financial Planning & Budget 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
18/05/11 Practical Microfinance Session 3/7: MF Building Blocks  9. Investment & Funding
10. Evaluation with regularity 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
11. Monitoring & impact 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
Conclusion <ul><li>Review all the components above </li></ul><ul><li>Be very clear about funding & financial plan </li></u...
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Session 3 assmt building blocks mf 2011 05-23

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  • ----- Meeting Notes (10/11/2010 18:56) ----- Revision of features of MF: financial services for the poor, sustainable, targeting towards poor, poor are highly bankable, poor have ideas and if given the chance will get ahead
  • Two of you to Research ‘ SOMEWHERE ’ and Submit Preliminary Findings &amp; Suggestions. Budget $10K one month
  • ----- Meeting Notes (10/11/2010 20:27) ----- Make this a workbook sheet for Session 2 Answers: geography, map, cultural background, laws, esp financial and commercial ones; political situation; existing MFIs in region; which MFI could share about their experience; is there a MF association?; other types of finance available and interest rates (do it when you are there); infrastructure; types of businesses and issues they face; any SMEs, large corporates; any insurance
  • From your Preliminary Research (1) Credit Company (2) Re State Mission
  • ----- Meeting Notes (10/11/2010 20:27) ----- Quantatative and qualitative surveys
  • ----- Meeting Notes (10/11/2010 20:27) ----- Assumptions to make about interest rates: what are others charging? Scientific way of working out interest rates: Y1, Y2, etc. Simple and complicated approaches. Aim to be sustainable and permanent, therefore have to cover costs. Why do MFIs charge flat rate of interest? Easy for clients to understand. How are you able to encourage clients to repay promptly? Increase loan when they come back 2nd time. Huge demand for loans from unbanked. Social mobilisation sometimes contracted out to other NGOs. Even if they are poor, every household has money to spend.
  • ----- Meeting Notes (10/11/2010 20:27) ----- Average balance $50, $20 interest, therefore 40% per annum interest, not 20%. Most MFIs charge a flat rate of interest. Loan portfolio. Pose a Q: when starting a MFI compared to a regular retail shop, eg mobile phone shop. You have stock, sell the phones each day, make a profit, then take expenses out. What is your picture of your MFI? Your stock is your loan portfolio.
  • What is the PROJECTED LOAN PORTFOLIO? ----- Meeting Notes (10/11/2010 20:27) ----- Biggest stock in shop is your loan portfolio. Loan officers: biggest diff b/w CB (clients go to the bank), MF (you go to the clients). What assumptions do you make about your portfolio? What strategy do you use for capturing the clients?
  • What is Effective Service Charge. By Year 5, it earns? ----- Meeting Notes (10/11/2010 20:27) ----- Initial fee charged by MFI upfront. Arrangement fee plus interest can be high amt. Don&apos;t get alarmed b/c clients have been paying high amt to money lenders. What will Y1 look like? Have to employ 4-6 loan officers at once.
  • DIFFERENCES Expenses &amp; Capital Expenditure
  • Terms &amp; Conditions &amp; Effect on Cash Flows
  • Transcript of "Session 3 assmt building blocks mf 2011 05-23"

    1. 1. Building Blocks of MFI 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks Practical Microfinance Course, Session 3 Microfinance Assignment Sadrudin Akbarali, FCA
    2. 2. Session 3: assignment <ul><li>Preparation for Session 4 and Your MFI case study </li></ul><ul><li>Read Power Point handout: Session 3 Assignment: Building Blocks for MF </li></ul><ul><li>Pair up with a ‘ buddy ’ to work on your microfinance case study </li></ul><ul><li>Course assignment: step 1 </li></ul><ul><li>Choose a country, region or city you want to research for a microfinance project. </li></ul><ul><li>You will produce a report to present to the group in Session 7 </li></ul><ul><li>FOR REVISION </li></ul><ul><li>Rural Finance on-line Lesson 7. Understanding the accounts of financial service providers </li></ul><ul><li>http://www.microfinancelessons.com/about/lesson7.html </li></ul><ul><li>Summary Session 3: Measuring Performance </li></ul><ul><li>Research </li></ul><ul><li>Mission </li></ul><ul><li>Planning </li></ul><ul><li>Design </li></ul><ul><li>Implementation </li></ul><ul><li>Evaluation </li></ul><ul><li>Case study: Eastern Tajikistan, 1996-2010 </li></ul><ul><li>R ead about Eastern Tajikistan on the BBC web-link:  http://news.bbc.co.uk/1/hi/world/asia-pacific/1484945.stm </li></ul>18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
    3. 3. Session 3 Assignment : Read through ‘ Building Blocks for starting a basic microfinance programme ’ <ul><li>Research </li></ul><ul><li>Mission </li></ul><ul><li>Planning </li></ul><ul><li>Design </li></ul><ul><li>Implementation </li></ul><ul><li>Evaluation </li></ul><ul><li>Your course assignment: Choose one of these </li></ul><ul><ul><li>a MFI to study and compare with another, make recommendations for your chosen MFI </li></ul></ul><ul><ul><li>an NGO to advise about working with a MFI or setting one up </li></ul></ul>18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
    4. 4. THINK of the Country/Region 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
    5. 5. 1. Environment Scanning Research 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
    6. 6. Before preparing your proposal 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks List 7 KEY information points List at least 5 sources of information 1. 1. 2. 2. 3. 3. 4. 4. 5. 5. 6. 7.
    7. 7. 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
    8. 8. 3. Market research 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
    9. 9. 4. Design of Products & Methodology 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
    10. 10. <ul><li>Loan of $100; Flat rate interest Charged 20%. Repayable over 12 months by monthly instalments. </li></ul><ul><li>Total Payable = $120 </li></ul><ul><li>Monthly Instalment = $10. </li></ul><ul><li>Principle=? </li></ul><ul><li>Effective Interest Rate? </li></ul>TEST 2 from session 3 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
    11. 11. 5. Demand & Marketing Plan 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
    12. 12. LOAN PORTFOLIO (EXCEL FILE 1) 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks ASSUMPTIONS Year 1 $ Year 2 $ Year 3 $ Year 4 $ Year 5 $ Monthly Interest rate 2% 2% 2% 2% 2% Loan Arrangement fee 1% 1% 1% 1% 1% Average Duration-mnths 12 12 12 12 12 # of officers (Per Staff Workplan) 4 8 16 20 24 Average size of New Loans 200 220 242 266 293 Average size of Repeat Loans - 248 300 357 420 # of New Loans Disbursed 720 1,440 2,880 3,600 4,320 # of Repeat Loans disbursed - 432 1,296 3,024 5,184 Movement of Loan Portfolio           Prev Yr Loans b/f 84,672 215,956 553,582 981,674 Disbursements during year   - Value of New Loans Disbursed 144,000 316,800 696,960 958,320 1,264,982 -Value of Repeat LDs - 106,920 388,476 1,080,248 2,179,600 Total Value of LDs in current yr 144,000 423,720 1,085,436 2,038,568 3,444,582 Gross Value of Loans 144,000 508,392 1,301,392 2,592,150 4,426,256 Repayments   - Prev Yr Loans Repaid 84,672 215,956 553,582 981,674 - New & Repeat Loans= 2/5 * LDs 57,600 203,357 520,557 1,036,860 1,770,503 (repts applied 40% instead of 45%)   Total Repayments 57,600 288,029 736,513 1,590,442 2,752,177 Current yr Loan Outstanding 86,400 220,363 564,879 1,001,708 1,674,080 Loans written-off-2% 1,728 4,407 11,298 20,034 33,482 Net Loans Outstanding 84,672 215,956 553,582 981,674 1,640,598 Loss Reserve 2% 1,693 4,319 11,072 19,633 32,812 Average Loan Outstanding 42,336 150,314 384,769 767,628 1,311,136 CASE LOAD           No of Active Loans per officer 103 133 149 189 226 Value of Active Loans per officer 10,584 18,789 24,048 38,381 54,631 Loan Volume & Portfolio Movement           Movement of Loans-Volume           # of New Loans Disbursed 720 1,440 2,880 3,600 4,320 # of Repeat Loans disbursed - 432 1,296 3,024 5,184 Total 720 1,872 4,176 6,624 9,504 Repyments:           New & Repeat Loans= 2/5 * LDs 288 749 1,670 2,650 3,802 Total Repayments 288 749 1,670 2,650 3,802 Current yr Loan Outstanding 432 1,123 2,506 3,974 5,702 Loans written-off-5% 22 56 125 199 285 Net Loans Outstanding 410 1,067 2,380 3,776 5,417
    13. 13. 6. Organisation 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
    14. 14. 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks Organisation chart & Governance
    15. 15. 7. Implementation and Work Plan 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
    16. 16. 8. Financial Planning & Budget 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
    17. 17. 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks 9. Investment & Funding
    18. 18. 10. Evaluation with regularity 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
    19. 19. 11. Monitoring & impact 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
    20. 20. Conclusion <ul><li>Review all the components above </li></ul><ul><li>Be very clear about funding & financial plan </li></ul><ul><li>Prepare one page Executive Summary & incorporate it into the entire proposal </li></ul><ul><li>Make a presentation to the Stakeholders </li></ul><ul><li>Future: consider evolution of the credit company to a fully fledged Microfinance Bank </li></ul>18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
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