Session 3 assmt building blocks mf 2011 05-17

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1. Building Blocks of MFI 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks Practical Microfinance Course, Session 3 Microfinance Assignment Sadrudin…
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  • 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. Session 3 Assignment : 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 a MFI to study and compare with another, make recommendations </li></ul>18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
  • 3. From Session 1: What is Microfinance? <ul><li>65%+ in Less Developed Countries (LDC) are Unbanked, most of them are Poor or Ultra Poor </li></ul><ul><li>The Poor </li></ul><ul><ul><li>Bankable, often with 98% repayment rates </li></ul></ul><ul><ul><li>Lack collateral or records </li></ul></ul><ul><ul><li>Want savings facility </li></ul></ul><ul><li>Almost all MFIs apply Group Lending </li></ul><ul><li>Access is more important than price of loans </li></ul><ul><li>They do not mind paying higher interest rate than Commercial Banks, so long as it below local money lenders ’ rates. </li></ul>18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
  • 4. THINK of the Country/Region 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
  • 5. 1. Environment Scanning Research 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
  • 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. 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
  • 8. 3. Market research 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
  • 9. 4. Design of Products & Methodology 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
  • 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. 5. Demand & Marketing Plan 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
  • 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. 6. Organisation 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
  • 14. 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks Organisation chart & Governance
  • 15. 7. Implementation and Work Plan 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
  • 16. 8. Financial Planning & Budget 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
  • 17. 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks 9. Investment & Funding
  • 18. 10. Evaluation with regularity 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
  • 19. 11. Monitoring & impact 18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
  • 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>Consider evolution of the credit company to a fully fledged Microfinance Bank </li></ul><ul><li>GOOD LUCK </li></ul>18/05/11 Practical Microfinance Session 3/7: MF Building Blocks
  • 21. Session 3: assignment <ul><li>Preparation for Session 4 and Your MFI case study </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>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>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
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