13/04/23 Practical Microfinance Session 3/7: MF Building Blocks 1

Building Blocks of MFI

Practical Microfinance Course, Session 3 Microfinance

Assignment

Sadrudin Akbarali, FCA

Session 3: assignmentPreparation for Session 4 and Your MFI case studyRead Power Point handout: Session 3 Assignment:

Building Blocks for MF

Pair up with a ‘buddy’ to work on your microfinance case study

Course assignment: step 1Choose a country, region or city you want to

research for a microfinance project. You will produce a report to present to the group in

Session 7FOR REVISIONRural Finance on-line Lesson 7. Understanding the

accounts of financial service providershttp://www.microfinancelessons.com/about/lesson7.html

Summary Session 3: Measuring Performance • Research• Mission• Planning• Design• Implementation• EvaluationCase study: Eastern Tajikistan, 1996-2010

Read about Eastern Tajikistan on the BBC web-link: http://news.bbc.co.uk/1/hi/world/asia-pacific/1484945.stm

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Session 3 Assignment: Read through ‘Building Blocks for starting a basic microfinance programme’

Research Mission Planning Design Implementation EvaluationYour course assignment: Choose one of these

a MFI to study and compare with another, make recommendations for your chosen MFI

an NGO to advise about working with a MFI or setting one up

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Building Blocks 3

THINK of the Country/RegionTHINK of the Country/Region

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1. Environment Scanning Research 1. Environment Scanning Research

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Before preparing your proposalBefore preparing your proposal

List 7 KEY information points List at least 5 sources of information

1. 1.

2. 2.

3. 3.

4. 4.

5. 5.

6.

7.

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3. Market research

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4. Design of Products & Methodology4. Design of Products & Methodology

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• Loan of $100; Flat rate interest Charged 20%. Repayable over 12 months by monthly instalments.

• Total Payable = $120• Monthly Instalment = $10. • Principle=? • Effective Interest Rate?

TEST 2 from session 3TEST 2 from session 3

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5. Demand & Marketing Plan5. Demand & Marketing Plan

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LOAN PORTFOLIO (EXCEL FILE 1)LOAN PORTFOLIO (EXCEL FILE 1)

ASSUMPTIONSYear 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

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6. Organisation6. Organisation

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Organisation chart & Governance

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7. Implementation and Work Plan

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8. Financial Planning & Budget

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9. Investment & Funding

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10. Evaluation with regularity10. Evaluation with regularity

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11. Monitoring & impact11. Monitoring & impact

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ConclusionConclusion

• Review all the components above• Be very clear about funding & financial plan• Prepare one page Executive Summary &

incorporate it into the entire proposal• Make a presentation to the Stakeholders• Future: consider evolution of the credit

company to a fully fledged Microfinance Bank

• Review all the components above• Be very clear about funding & financial plan• Prepare one page Executive Summary &

incorporate it into the entire proposal• Make a presentation to the Stakeholders• Future: consider evolution of the credit

company to a fully fledged Microfinance Bank

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