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TEAM MELIORAExpanding Product Segments and a Microfinance Credit Rating System
Story
Story
Team
Introduction Recommendation 1 Recommendation 2 Financials Implementation
Mike
Alcazaren
Zaccarie
Peone
Shah
Choudhury...
Agenda
Problem Facing M-KOPA
Recommendation 1
Recommendation 2
Financials
Implementation
Introduction Recommendation 1 Rec...
M-KOPA Operations
Kenya
Introduction Recommendation 1 Recommendation 2 Financials Implementation
48,000,000
Population of Kenya
20%
Will not have access to electricity by 2018
11Mhouseholds
Mostly rural
Introduction Rec...
Introduction Recommendation 1 Recommendation 2 Financials Implementation
~500,000 households
M-KOPA households in Kenya
4....
How does M-KOPA:
Expand off-grid solar
operations in Kenya?
Remain financially
viable?
Add value to Kenya?
Introduction Re...
Executive Summary
1. Expand Product Segments
2. Establish Microfinance Credit Rating System
5 year timeline
$4.6M – Net Pr...
Expanding Product
Segments
Recommendation 1
Introduction Recommendation 1 Recommendation 2 Financials Implementation
Introduction Recommendation 1 Recommendation 2 Financials Implementation
By 2018 M-KOPA’s primary
market will be connected...
Introduction Recommendation 1 Recommendation 2 Financials Implementation
$150 million
World Bank Initiative
14 counties wi...
Introduction Recommendation 1 Recommendation 2 Financials Implementation
7 counties –
10% of total population
Represents s...
Introduction Recommendation 1 Recommendation 2 Financials Implementation
1 of 7 identified
counties
Willingness to
pay of ...
Introduction Recommendation 1 Recommendation 2 Financials Implementation
Customer Profile
Political instability in designa...
Microfinance Credit Rating
System for Financial
Institutions
Introduction Recommendation 1 Recommendation 2 Financials Imp...
Introduction Recommendation 1 Recommendation 2 Financials Implementation
Data is the new oil
Monetization of data
Introduction Recommendation 1 Recommendation 2 Financials Implementation
What data can be sold?
Microfinance
Customer Database
Introduction Recommendation 1 Recommendation 2 Financials Implementation
What data can be s...
“
“If you boil it down,
what we are is a
financecompany”
- Nick Hughes, M-KOPA
Strategy Director & Founder
Introduction Re...
25% of
customer base
returns for new loans
Introduction Recommendation 1 Recommendation 2 Financials Implementation
Moneti...
$10 per report
Selling Credit Rating to Microfinance Institutions
Develop Credit Rating
Algorithm
UTILIZE EXISTING DATA
Build Partnerships
SELL TO EXISTING LENDERS
Create Customer
Awarenes...
Colombia:
35% to 15% reduction in operational cost
Doubled the amount of loans per loan officer
20% increase in likelihood...
TALA – Different customer segment
Connects 10,000+ data points per customer to build a
credit score by utilizing smartphon...
2 Market share over the period of 5 years
25%
1 Opportunity Cost of Capital
12.77%
3 Operating margins:
50% for regular bu...
Overall Impact
7.4% CAGR of Sales
NPV of
$4.6M
Inclusion of 94K customers
Introduction Recommendation 1 Recommendation 2 F...
2 Market share over 5 year period
10%
1 No aid from World Bank
4 year repayment structure
Sensitivity Analysis
Introductio...
Sensitivity Analysis
3.0% CAGR of Sales
Introduction Recommendation 1 Recommendation 2 Financials Implementation
-
1,000,0...
Key Performance Indicators
KPI Criteria
Organic growth in existing market 5%
Market share captured through expansion 7%
Nu...
Final Recommendations
1. Expand Product Segments
2. Establish Microfinance Credit Rating System
5 year timeline
$4.6M – Ne...
Year 1 Year 2 Year 3 Year 4 Year 5
Request World
Bank Funds
Launch sales in Tana
River & Taita-Taveta
counties
Incorporate...
Year 1 Year 2 Year 3 Year 4 Year 5
Develop algorithm for
credit rating system
Train sales team &
develop partnerships with...
Year 1 Year 2 Year 3 Year 4 Year 5
Request World
Bank Funds
Develop algorithm for
credit rating system
Launch sales in Tan...
Story
Questions?
6.
Appendices
Data.
Sources.
Sources
1. The World Bank, (July 5, 2017) Off-Grid Solar Access Project for Underserved Countries,
The World Bank (Report ...
Tables
Tables
*Additional investment is negligible and we have prepared projected Income statement only for
the targeted region based on...
Targeted mini-grid sites in Kenya
Sensitivity Analysis
With Aid from World Bank (In million USD)
Market Share 5% 10% 15% 20% 25%
NPV $1.45 $2.23 $2.89 $3.91...
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Team Meliora - Duke Energy Case Competition 2017

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M-KOPA Solar: Off-grid Regulations and Business Models in Kenya​

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Team Meliora - Duke Energy Case Competition 2017

  1. 1. TEAM MELIORAExpanding Product Segments and a Microfinance Credit Rating System
  2. 2. Story
  3. 3. Story
  4. 4. Team Introduction Recommendation 1 Recommendation 2 Financials Implementation Mike Alcazaren Zaccarie Peone Shah Choudhury Ehsan Chowdhury Meghan Butt
  5. 5. Agenda Problem Facing M-KOPA Recommendation 1 Recommendation 2 Financials Implementation Introduction Recommendation 1 Recommendation 2 Financials Implementation
  6. 6. M-KOPA Operations Kenya Introduction Recommendation 1 Recommendation 2 Financials Implementation
  7. 7. 48,000,000 Population of Kenya 20% Will not have access to electricity by 2018 11Mhouseholds Mostly rural Introduction Recommendation 1 Recommendation 2 Financials Implementation
  8. 8. Introduction Recommendation 1 Recommendation 2 Financials Implementation ~500,000 households M-KOPA households in Kenya 4.5% market penetration
  9. 9. How does M-KOPA: Expand off-grid solar operations in Kenya? Remain financially viable? Add value to Kenya? Introduction Recommendation 1 Recommendation 2 Financials Implementation Problem Statement:
  10. 10. Executive Summary 1. Expand Product Segments 2. Establish Microfinance Credit Rating System 5 year timeline $4.6M – Net Present Value Introduction Recommendation 1 Recommendation 2 Financials Implementation 1 2
  11. 11. Expanding Product Segments Recommendation 1 Introduction Recommendation 1 Recommendation 2 Financials Implementation
  12. 12. Introduction Recommendation 1 Recommendation 2 Financials Implementation By 2018 M-KOPA’s primary market will be connected to grid energy Result of Kenyan Gov’t Last Mile Connectivity Program (LMCP) 80% of population Current Situation
  13. 13. Introduction Recommendation 1 Recommendation 2 Financials Implementation $150 million World Bank Initiative 14 counties with immediate need of an alternative energy solution Only 35% of region has access to energy Current Situation
  14. 14. Introduction Recommendation 1 Recommendation 2 Financials Implementation 7 counties – 10% of total population Represents smallest presence of mini-grid sites Accessible cluster with Nairobi and Mombasa as central hubs Target Market
  15. 15. Introduction Recommendation 1 Recommendation 2 Financials Implementation 1 of 7 identified counties Willingness to pay of $5 per month for 3 years Nomadic and rural communities where grid solutions are low risk Customer Profile 225,000 households
  16. 16. Introduction Recommendation 1 Recommendation 2 Financials Implementation Customer Profile Political instability in designated regions Risks Sparsely populated customer base Solution: Local salesforce
  17. 17. Microfinance Credit Rating System for Financial Institutions Introduction Recommendation 1 Recommendation 2 Financials Implementation Recommendation 2
  18. 18. Introduction Recommendation 1 Recommendation 2 Financials Implementation Data is the new oil Monetization of data
  19. 19. Introduction Recommendation 1 Recommendation 2 Financials Implementation What data can be sold?
  20. 20. Microfinance Customer Database Introduction Recommendation 1 Recommendation 2 Financials Implementation What data can be sold?
  21. 21. “ “If you boil it down, what we are is a financecompany” - Nick Hughes, M-KOPA Strategy Director & Founder Introduction Recommendation 1 Recommendation 2 Financials Implementation
  22. 22. 25% of customer base returns for new loans Introduction Recommendation 1 Recommendation 2 Financials Implementation Monetization of Microfinance Customer Data Initial M-KOPA repayment rate 93% Returning M-KOPA repayment rate 98% Average repayment rate in Kenya 52%
  23. 23. $10 per report Selling Credit Rating to Microfinance Institutions
  24. 24. Develop Credit Rating Algorithm UTILIZE EXISTING DATA Build Partnerships SELL TO EXISTING LENDERS Create Customer Awareness TRAIN SALES FORCE Success Factors: - Customer behavior - Technology introduction - Stronger returns Introduction Recommendation 1 Recommendation 2 Financials Implementation Implementation Strategy
  25. 25. Colombia: 35% to 15% reduction in operational cost Doubled the amount of loans per loan officer 20% increase in likelihood of employment Introduction Recommendation 1 Recommendation 2 Financials Implementation Success Stories
  26. 26. TALA – Different customer segment Connects 10,000+ data points per customer to build a credit score by utilizing smartphone inputs Introduction Recommendation 1 Recommendation 2 Financials Implementation Risks: Competition & Regulation Strict lending regulations – Non-Performing Loans of 11.66% in 2016 Credit ratings - Tangible solution without present regulations
  27. 27. 2 Market share over the period of 5 years 25% 1 Opportunity Cost of Capital 12.77% 3 Operating margins: 50% for regular business 80% for credit report sales Assumptions Introduction Recommendation 1 Recommendation 2 Financials Implementation
  28. 28. Overall Impact 7.4% CAGR of Sales NPV of $4.6M Inclusion of 94K customers Introduction Recommendation 1 Recommendation 2 Financials Implementation - 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 2019E 2020E 2021E 2022E 2023E REVENUEINUSD Revenue & Net Income Impact Estimated Sales Net Income
  29. 29. 2 Market share over 5 year period 10% 1 No aid from World Bank 4 year repayment structure Sensitivity Analysis Introduction Recommendation 1 Recommendation 2 Financials Implementation
  30. 30. Sensitivity Analysis 3.0% CAGR of Sales Introduction Recommendation 1 Recommendation 2 Financials Implementation - 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 2019E 2020E 2021E 2022E 2023E REVENUEINUSD Sensitivity Analysis Estimated Sales Net Income NPV of $2.2M
  31. 31. Key Performance Indicators KPI Criteria Organic growth in existing market 5% Market share captured through expansion 7% Number of credit reports sold 4% of existing customers Accuracy in collected data 90% Introduction Recommendation 1 Recommendation 2 Financials Implementation
  32. 32. Final Recommendations 1. Expand Product Segments 2. Establish Microfinance Credit Rating System 5 year timeline $4.6M – Net Present Value 1 2 Introduction Recommendation 1 Recommendation 2 Financials Implementation
  33. 33. Year 1 Year 2 Year 3 Year 4 Year 5 Request World Bank Funds Launch sales in Tana River & Taita-Taveta counties Incorporate best practices and launch full scale sales operation Introduction Recommendation 1 Recommendation 2 Financials Implementation Expanding Product Segments 25% market share in target market
  34. 34. Year 1 Year 2 Year 3 Year 4 Year 5 Develop algorithm for credit rating system Train sales team & develop partnerships with lending institutions (84%) Monetization other data sources for additional revenue stream Introduction Recommendation 1 Recommendation 2 Financials Implementation Microfinance Credit Rating System
  35. 35. Year 1 Year 2 Year 3 Year 4 Year 5 Request World Bank Funds Develop algorithm for credit rating system Launch sales in Tana River & Taita-Taveta counties Incorporate best practices and launch full scale sales operation Train sales team & develop partnerships with lending institutions (84%) Monetization other data sources for additional revenue stream Introduction Recommendation 1 Recommendation 2 Financials Implementation Full Implementation 25% Market share in target market
  36. 36. Story
  37. 37. Questions?
  38. 38. 6. Appendices Data. Sources.
  39. 39. Sources 1. The World Bank, (July 5, 2017) Off-Grid Solar Access Project for Underserved Countries, The World Bank (Report PAD2008, 2017) Retrieved from http://documents.worldbank.org 2. The World Bank (October 2003) Credit Scoring in Microfinance, The World Bank – Women’s World Banking (Volume 1 No 2) Retrieved from https://www.microfinancegateway.org 3. Karlan, D. & Zinman, J. (November 2009) Expanding Credit Access: Using Randomized Supply Decisions to Estimate the Impacts The Review of Financial Studies (Volume 23, Issue1) Retrieved from https://academic.oup.com 4. Wikipedia (Oct. 2017) Microfinance in Kenya, Wikipedia Retrieved from: https://en.wikipedia.org 5. Snyder D. (October 2008) The Potential for Credit Scoring for SME Lending in Kenya, FSD Kenya Retrieved from https://www.agrifinfacility.org 6. Safety, Health, and Environmental Department- Kenya Power and Lighting Company. (August 2014). Environmental and Social Management Framework for Kenya Power’s Last Mile Connectivity Programme. Retrieved From http://kplc.co.ke 7. Bawakyillenuo, S., Osiolo, H., and Pueyo, A. (April 2016). Cost and Returns of Renewable Energy in Sub-Saharan Africa: Comparison of Kenya & Ghana. Retrieved From https://www.researchgate.net 8. Ghanbariamin, R. (February 2015). Estimating the Economic Opportunity Cost of Capital for Kenya. Retrieved From http://i-rep.emu.edu
  40. 40. Tables
  41. 41. Tables
  42. 42. *Additional investment is negligible and we have prepared projected Income statement only for the targeted region based on the above assumptions. Considering economic opportunity cost of capital to be 12.77% [7] [8], NPV stands at $4.06Mn. Tables
  43. 43. Targeted mini-grid sites in Kenya
  44. 44. Sensitivity Analysis With Aid from World Bank (In million USD) Market Share 5% 10% 15% 20% 25% NPV $1.45 $2.23 $2.89 $3.91 $4.66 Expanding Product Segments $0.76 $1.52 $2.18 $3.18 $3.92 Credit Report Sales $0.69 $0.71 $0.72 $0.73 $0.74 Without Aid from World Bank (In million USD) Market Share 5% 10% 15% 20% 25% NPV $1.34 $2.18 $2.58 $3.44 $4.05 Expanding Product Segments $0.65 $1.48 $1.86 $2.71 $3.31 Credit Report Sales $0.69 $0.71 $0.72 $0.73 $0.74

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