strategic review phase 2 august 2010 - board
TRANSCRIPT
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MFC Strategic ReviewFinal report
- Warsaw, August 2010 -
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Contents
1.Strategic Choices2.Mission and Objectives3.Business Strategy4.Operations5.Governance6.Human Resources7.Financial Model
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What are the strategic choices for MFC?
Strategic Choices Key elements Recommendation Priori
Opportunities Market Positioning Global Facilitator and Service Provider HIGH
Customer expansion Local liaisons in ECA sub-regions EU Focus
HIGH
Geographic expansion
Respond to opportunities for global interventions (such as Ford invitation to createan SPM fund for networks)
Realize the missoin in the regoin (globalizztion is a way to do this), market toolimited to get fees Demonstrate demand and potential of the region for MFC and relevancy to
MFCs mission Identify funders moving to these new regions Leverage experience in ECA to be used in other regions, explore possibility of
members facilitating in other regions)
MEDIUM
MFCs Value Proposition -offerings
Develop a Standard for Social Performance, based on the existing QAT (investorscould be interested by a standard)
MEDIUM
Partnerships Develop partnerships & alliances for MFC: not where MFC is stronger, butpotentially with institutions more credible in specific regions, e.g.. SEEP , Fitch,think tanks ; universities (Solvay , Greenwich )
MEDIUM
Continuous Improvement Miscellaneous optimizations ofcurrent operations based onNCAT assessment
CommunicationHR
HIGH
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Contents
1.Strategic Choices2.Mission and objectives3.Business Strategy4.Operations5.Governance6.Human Resources7.Financial Model
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Proposition1/3Revised Vision & Mission
Mission
MFCs mission is to contribute to poverty reduction and humanpotential development by promoting a socially oriented and sustainablemicrofinance sector that provides adequate financial and non-financialservices to a large number of poor families and micro-entrepreneurs..
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Proposition 2/3Definition of objectives for the next 5 years
# Objective Quantitative KPI Qualitative KPI Baseli ne
Target Timeli ne
Accountable
1 Set up adequate policies and regulationspromoting responsible finance andinclusion
# of countries adopting policies (incl. selfregulation)# of countries developing policies
Quality of the Contentof policiesCoverage of the
policies
7 countries out of 26 2015 Gzregorz &Piotr
2 Establish transparency on social andfinancial performance dimensions of MFIsand investors for a better allocation ofresources
# of MFIs reporting to MIX on social andfinancial# of investors disclosing agreed principleson SP
Quality of informationprovided to MIX
80% of MFIs alreadyreporting on financialperformance to reporton social
2015 Kasia & Ewa
3 Set up a sound management system tomanage both social and financialperformance at MFI
# of MFIs with the seal of good practices Code of good practices 20% of transparentMFIs
2015 Kasia
4 Build processes and tools for low incomepeople financial education
# of countries with a developed system forfinancial education
Quality of tools andprocesses
5 countries 2015 Kasia
5 Ensure long term sustainability of allactors
Long term funding securityRevenues growthEfficiency (operations, organization, etc.)Build own strategic investment capability
Stability of fundingmodel
> 5 years 2015 Gzregorz
6 Increase the number of served people /improve well being
# number of people served (check with MIX)
to be defined data available onannual basis
2015 GzregorzJustyna
Objectives within the control of MFC Objectives out of the control of MFC
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Proposition 3/3Definition of objectives for the next 5 years
# Objective Quantitative KPI Qualitative KPI Baseline Target Timeli ne
Accountable
7 Be recognized bystakeholders as thereference in the market
# of publicationsMFC website traffic
Survey to be defined Communication
8 Develop a standard to assess MFIscontribution to social performance
to be defined Survey to be defined Kasia (probablynot realistic asthere will be aglobal initiative)9 Strengthen a large and active
membership based network
maintain number of members Track the involvement ofmembers (participation totraining, conferences, etc.)
to be defined Communication
10 Establish a robust staff with the relevant
skills to support the activities of theorganization
attrition rate% employees reaching targetdevelopment
Climate Survey to be defined Business Support
Manager
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Contents
1.Strategic Choices2.Vision, Mission, Objectives3.Business Strategy4.Operations5.Governance6.Human Resources7.Financial Model
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Business StrategySector Dynamics and MFC
Donor interest in ECA microfinance is reducing, which combined with the rise of service providers andpeer networks is challenging MFCs sustainability.
Rise of Service Providers
ered by professional institutes (e.g. Frankfurt school), and local language providers
Donors Moving Away
declining and investments are increasing
rest is moving away from Europe to poorer states of Africa and Asia
Rise of Peer Networks
European Microfinance Network preferred by European CRussian Microfinance Network preferred for Russian langu
1 2
4
Is MFCs role sustainable?
Pressure on Grants
Pressure on EarnedRevenue
(Contribution) Changing Market Demand
Commercially transformed MFIs: Demand advanced trainings on ALM Other MFIs: Demand courses like leadership development and lo
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Customer expansionWestern Europe
To mitigate the donors shift, MFC should investigate the opportunity to focus more on EU
Potential Benefits
Funding opportunity: Microfinance is a priority for EU /EIF while there is no retail capacity in many ofthe EU countries
Political advantages of being more recognized
Alliances to be developed
Limitations
Limited competencies to work with banks.
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Geographic expansionMFCs Geographic Shift from Europe to Central Asia
MFCs epicenter had to shift to Central Asia in pursuit of donor funds
MFC set up an office in 2008-09 in Kirghizstan asa hub for Central Asia since donor interestwaned for funding in East Europe while risingfor the relatively poorer Central Asian states
MFC is also pursuing programs in Africa and LatinAmerica jointly with local organizations following donor funds move to these regions.However this could raise questions fromexternal stakeholders on MFCs vision offacilitation role within ECA.
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PartnershipProvide Services in ECA & Globally Build Partnerships
For enhancing the identified service(s), MFC should build capability with strategic partners.
Service Illustrative Potential Partner Partner Type Objective
SPM Ratings agency Fitch, S&P, Moodys* Commercial Fee-revenue sharing on social rating tools and audits
MCPI (Philippines) or SANABEL (Egypt) Peer network Joint enhancement and services on SPM tools
Research European Microfinance Platform Peer network Develop new research products
MIX (new leadership) NGO Joint ownership of financial benchmarking products
Training &Consulting
Banking practitioners Commercial Consultants-on-call for technical trainings such as asset-liabilitymanagement
Local country-level providers Any Local language trainings, customized trainings
Professional training institutes(e.g. Frankfurt school)
Commercial Joint delivery of leadership development & other such programs
*Moodys Investors Services is in the process of developing a social rating tool and has approached MFC for facilitating contact with MFCs members
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Contents
1.Strategic Choices2.Vision, Mission, Objectives3.Business Strategy4.Operations5.Governance6.Human Resources7.Financial Model
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OperationsCommunication, Process & Technology
Objective Initiative Description
Communication Website Redesign and upgrade MFC WebsiteInclude a Russian language page on WebsiteIntroduce Blogs for social networking on Website
Process Central procurement & supportservices
Create new position of Project Coordinator to support common administrative needs of program managers
Centralized document archive Upgrade server, increase capacity for central storageCreate procedure/manual for document sharing
Technology Server management Evaluate performance of current IT consultant, Trigger and if need be engage a new consultantIdentify Software as a Service (SaaS)provider (equivalent of US Convio in Europe) with CRM platformCreate Best Practices manual on IT/process for staff
Project management tool
Identify and customize project management tool (with features similar to Mind Mapping tool)
Process and technology tools will enable MFC to increase internal and external effectiveness of itsprograms.
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Contents
1.Strategic Choices2.Vision, Mission, Objectives3.Business Strategy4.Operations5.Governance6.Human Resources7.Financial Model
G
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GovernanceGoverning bodies interactions
Members
Elects at Annual Members Meeting
MFCManagement
Board
MFC Board of Directorsmeets on a quarterly basisis composed of
not less than 3 and not
more than 7 directors up to 4 member-electeddirectors up to 3 directorsnominated by BoardChairperson, Vice-chairperson, Secretary andTreasurer elected3 Founding memberspositions
MFC Management Board
Membership of the Board may notcoincide with fulfillment of a functionon the Management Board
NominatesReports
MFC BoardChairperson
Director Director Director Director DirectorDirector
MembershipCommittee
MFC ExecutiveDirector
Hires
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Organization
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OrganizationCurrent roles & responsibilities
Position at ure of co nt rac txecutive Director Permanent
eputy Director Permanentffice Coordinator Permanent
ommunications Manager /Permanent Probationnformation Coordinator /Permanent Maternity Leave
vents Assistant /Permanent Probation&ccounting FinanceSpecialist Permanent&ccounting FinanceAssistant TemporaryP M P ro gr am M an ag er Permanent
P M P ro gr am A ss is ta nt TemporaryBP Program Coordinator PermanentE P P ro gr am M an ag er PermanentEP Project Coordinator PermanentE P P ro gr am A ss is ta nt Permanent
Researcher Permanentesearcher Program Assistant /Temporary Part Time
A P rog ra m Ma nag er PermanentA P ro gr am A ss is ta nt PermanentA P ro je ct C oo rd in at or PermanentT S upp or t Outsourced
Website OutsourcedLegal Outsourced&inance Accounting Outsourced
# of FTE %Permanent 13 68%Temporary 3 16%Probation 2 11%Maternity Leave 1 5% Internal Staff 19 100%Outsourced 4
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Organization
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gTarget Organization chart End of 2011 Professionalisation
MFC Consultants
Management Board
Capacity BuildingProgram
ResearchPolicy & KeyAccount
Management
Social PerformanceManagement
Central Asia Program
Marketing &Communication
Administration & Finance
MFC ExecutiveDirector
Deputy Director
BusinessSupportManager
Program Manager
Accounting &FinanceAssistant
BusinessSupportAssistant
Assistant
ProgramCoordinator
Financial EducationProgram
Researcher
ProgramAssistant
Conference andEvents
Event Coordinator
Consultant 1
Consultant 2
Consultant 3Consultant 4
Consultant 5
Consultant 6
Consultant 7
Consultant 8
Consultant 9
ProgramAssistant
Program Manager
ProgramAssistant
ProjectAssistant
Program Manager
ProgramAssistant
ProjectCoordinator
Marketing &Communications
Manager
ExecutiveAssistant
Chief OperationsOfficer
PolicyCoordinator
Organization
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gTarget Organization chart End of 2012 Expansion
MFC Consultants
Management Board
Capacity BuildingProgram
ResearchPolicy & KeyAccount
Management
Social PerformanceManagement
Regional Offices
Marketing &Communication Administration & Finance
MFC ExecutiveDirector
Deputy Director
BusinessSupport
Manager
RegionalManager
Accounting &FinanceAssistant
BusinessSupportAssistant
ProgramCoordinator
Financial EducationProgram
Researcher
ProgramAssistant
Conference andEvents
Event Coordinator
Consultant 1
Consultant 2
Consultant 3
Consultant 4
Consultant 5
Consultant 6
Consultant 7
Consultant 8
Consultant 9
ProgramAssistant
Program Manager
ProgramAssistant
ProjectAssistant
Program Manager
ProgramAssistant
ProjectCoordinator
ExecutiveAssistant
Chief OperationsOfficer
PolicyCoordinator
Balkans Program
RegionalManager
Africa Program
RegionalManager
Central Asia Program
Marketing &Communications
Manager
Assistant
Standards &Certification
Standards &Certification
Manager
Human Capital
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MFCs Challenges on HR
Better career growth and compensation are the key drivers of staff attrition, limiting MFCs stability andcapability development in the long run
Staff compensation inconsistent increments & bon
Bonus criteria not transparent/ understood
Work overload, stretched resources
No access to think-tanks / consultants for product innovation
Staff Attrition >20% over 3 yrs
nior management sustainability / lack of career path visibility
loed teams, limited informal communication
igh expectations from program managers
New joiner integration a difficult process
Stakeholder Interviews
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Consultant ManagementR d ti
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Recommendations
Issue RecommendationCoordinate consultants schedules between projects/programs Create and share a calendar with all project managers / consultantsProtect consultants from last minute cancellations Explore possibilities to include clauses in MFC contract with clients regarding cancellation that
would secure certain remuneration for cancelationIncrease # working days for consultants Link consultants chargeability to their performance and their skillsUse consultants to develop fundraising and write proposals Develop incentives for consultants: either money or min. amount of number of days.Manage Consultants operationally Document within the assignment the required outputs for each consultantAssess Consultants performance Prepare objectives at the beginning of the project and provide a performance review at the end of
the project with inputs from the Client and the Manager.
Develop internal communication with consultants Provide access to intranet / SharePointOrganize a monthly conference callEnsure program managers provide a regular communication to consultants
Develop Consultants skills Considerproviding training to consultants or reducing the number of consultants to the topperformers
Keep track of consultants updated CVs and list ofcompetencies
Formalize a standard CV and list of skills to be updated at the end of each project
Contents
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Contents
1.Strategic Choices2.Vision, Mission, Objectives3.Business Strategy4.Operations5.Governance6.Human Resources7.Financial Model
Financial ModelOverall Structure
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Overall Structure
Surplus / Deficit
Revenues
Costs
Membership fees
Conference
Training
Consulting
Grants Program revenues
Running Costs
Investments
Salaries
Office costs
Governance costs
Marketing costs
Other costs Legal, Tax etc.
Variable Costs / projects
Fixed Costs
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Financial ModelAssumptions - Costs
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Assumptions Costs
Definition Amount for 2009 Forecasts assumptionsFixed costs PLN 2 245,8kSalaries salaries of fixed-term employees (13 people
on the 2009 payroll)PLN 1 452,1k- Warsaw office : PLN 1215,1k- Bishkek office : PLN 237k
Linked to resources ramp up + inflation rateOffice costs offices rental,
utilities,telecommunication expenses,
Offices suppliesincl. server ? Website maintenance ?
PLN 793,7k- Warsaw office : PLN 717,1k- Bishkek office : PLN 76,6k
Linked to office development, i.e.New office for MFC in Warsawbased on expansion opportunities (Balkans,
Africa, etc)
Governance costs Board expensesAnnual ConferenceMarketing costs including in projects To be increased in order to promote MFCs
brandOther costs
external accountants,auditors,legal and financial consultants.
Included in Office costsVariable costs PLN 3 643,3k Depending on number of projectsProject related costs PLN 3 643,3k Investments N/AStandard development To be further assessedCertification system To be further assessedMarketing brand, claims & labeling To be further assessedBusiness Consulting To be further assessed
Financial ModelAssumptions Revenues
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Assumptions Revenues
Definition Amount for 2009 Forecasts assumptionsMembership Fees PLN 213,8kVolume Number of members ? Members From 105 to 120 membersIndividual Fee Annual subscription fee PLN ? Inflation rate onlyProgram revenues PLN 7220,6kCapacity Building projects PLN 947,6k
Research projects PLN 1009,6k Social Performance Mgt projects PLN 850,5k Financial & Education projects PLN 1489,9k Events including annual MFC conference PLN 994,4k PolicyProjects financed by core grants Financed by Omidyar PLN 591,4k Other projects CitiFoundation grant and other grants PLN 1337,2k Other operating income PLN 9,4k Adjustments from previous year N/ANew revenue streamsAccreditation revenues accreditation &training of auditors To be further assessedLicensing revenues To be further assessed
Publications To be further assessed
Financial ModelFunding options
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Funding options
In order to cover investments, MFC could consider the following options:
1. Core grants if relevant / specific to Africa
2. Direct Member contribution
3. Loan from members4. Loan from bank with guarantee from members (MFC has a good financial standing)
5. Bridging loan from a social investment fund
6. MFCs own Endowment Fund, i.e. collecting grants to develop MFCs core activities
7. MFCs own Investment Fund , i.e. collecting investments to develop activities that would generaterevenues
8. Mix of the above