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Microfinance Business Plan

NOV.05, 2023

Microfinance
 Business Plan

Sample Business Plan for Microfinance

Microfinance is a banking service that provides financial assistance to low-income individuals or groups who do not have access to formal financial services. In the US, microfinancing refers to loans of $50,000 or less. Microfinance institutions (MFIs) offer loans, savings, insurance, and other products to help clients improve their livelihoods, reduce their vulnerability, and achieve their goals.

This microfinance business plan template is about a sample microfinance bank that operates in the USA. It will provide an overview of a microfinance bank’s business models, services, customer focus, management team, success factors, financial highlights, and plans. Refer to our financial advisor business plan for a detailed understanding.

Executive Summary

Business overview.

InnoLoan is a microfinance bank that provides affordable and accessible financial services to low-income individuals and small businesses in the USA. Our mission is to empower our customers to improve their livelihoods, create jobs, and contribute to the economic development of their communities.

InnoLoan microfinance bank offers a range of financial products and services to its clients, such as:

  • Microloans – Tailored to the needs and capacities of our customers, with flexible repayment terms and competitive interest rates
  • Savings products – Help our customers build assets and plan for the future
  • Insurance products – Protect our customers from risks and uncertainties
  • Money transfer – Enables our customers to send and receive money conveniently and securely
  • Financial education program – Equips our customers with the skills and knowledge to manage their finances effectively

Customer Focus

Our target market comprises low-income individuals and small businesses excluded or underserved by the formal financial sector. We focus on women, youth, minorities, and rural populations facing multiple barriers to financial services. We segment our customers based on their demographic profile, income level, business activity, and financial needs.

Management Team

We have a strong management team with extensive experience and expertise in microfinance, banking, and social development. Our team is committed to delivering high-quality services to our customers and achieving social and financial impact. We also have a network of well-trained and motivated staff who work closely with our customers at the grassroots level.

Success Factors

Our success factors include:

  • Clear vision and mission
  • Customer-centric approach
  • Diversified product portfolio
  • Robust operational system
  • Strong risk management framework
  • Sound financial performance
  • Positive social impact

Financial Highlights

Our financial highlights for the next five years are:

  • Projected portfolio growth of 25% annually, reaching $50 million by 2026
  • Projected customer base of 100,000 by 2026, with 60% women, 40% youth, 30% minorities, and 70% rural
  • Projected revenue growth of 30% annually, reaching $15 million by 2026
  • Projected net income growth of 35% annually, reaching $3 million by 2026
  • Projected return on equity of 20% by 2026
  • Projected operational self-sufficiency of 120% by 2026

Company Overview

Who is innoloan microfinance bank.

InnoLoan microfinance bank, established in 2020 in San Francisco, CA, is a US-registered and regulated bank that offers affordable and accessible financial services to low-income individuals and small businesses.

InnoLoan Micro Lending Company

InnoLoan micro-lending company, a branch of InnoLoan microfinance bank, gives small US businesses microloans from $500 to $10,000. It supports entrepreneurs with good business ideas or who need more capital.

Industry Analysis

The microfinance industry in the USA is a growing and dynamic sector that provides financial services to millions of low-income individuals and small businesses who are excluded or underserved by the formal financial sector. 

According to the Global Microfinance Market Research Report 2023 , the global Microfinance market reached USD 218.31 billion in 2022. The market is expected to achieve USD 447.76 billion by 2028, exhibiting a CAGR of 12.72% during the forecast period.

Here are some more interesting insights on the microfinance industry:

  • There are approximately 10,000 microfinance institutions throughout the world. ( Fit Small Business )
  • Microfinance institutions worldwide serve more than 140 million borrowers and have a total loan portfolio estimated at $124 billion. ( Microfinance Barometer Report )

Customer Analysis

Demographic profile of target market.

Our target market consists of low-income individuals and small businesses excluded or underserved by the formal financial sector in the USA. We estimate that over 50 million potential customers in this market segment need financial services but lack access to them. We focus on women, youth, minorities, and rural populations facing multiple barriers to financial services.

Customer Segmentation

We segment our customers based on their demographic profile, income level, business activity, and financial needs. The following table shows the characteristics and size of our customer segments:

Competitive Analysis

Direct and indirect competitors.

We face direct and indirect competition from various providers of financial services to low-income individuals and small businesses in the USA. 

Some of the direct competitors include:

  • MicroVest – A microfinance institution with over $50 million in loans to 100,000 customers. It gives microloans from $100 to $10,000 at 18% interest. It also provides 2% interest savings accounts and life and health insurance.
  • MicroFlex – A microfinance institution with over $25 million in loans to 50,000 customers. It gives microloans from $50 to $5,000 at 15% interest. It also provides 1% interest savings accounts and a money transfer service with a 3% fee.

Some of the indirect competitors include:

  • Payday lenders – Providers of short-term loans that charge high-interest rates and fees. They target customers who need urgent cash but have poor credit history or no collateral.
  • Pawn shops – Providers of loans that require customers to pledge their personal belongings as collateral. They charge high-interest rates and fees and may sell the collateral if the customers fail to repay the loans.
  • Credit unions – Non-profit financial cooperatives offering their members loans, savings, and other services. They charge lower interest rates and fees than other providers but have limited outreach and eligibility criteria.

Competitive Advantage

Our competitive advantage is based on the following factors:

Marketing Plan

Our marketing plan is designed to achieve the following objectives:

  • To increase our brand awareness and recognition
  • To attract new customers and retain existing ones
  • To expand our market share and reach by entering new geographic areas
  • To enhance our competitive position and reputation

Our marketing plan consists of the following strategies:

  • Product strategy – We will continuously improve our products based on customer feedback and market research. We will also introduce new products in the future.
  • Price strategy – We will offer competitive and affordable prices that reflect the value and quality of our services. We will also provide incentives and discounts for loyal customers and referrals.
  • Place strategy – We will leverage our existing network of branches, agents, and partners to deliver our services to our customers.
  • Promotion strategy – We will use traditional and digital media to communicate our value proposition and social impact to our target market and stakeholders.

Operations Plan

Operation function.

Our operations plan describes delivering customer services and managing our internal processes. Our operations plan consists of the following functions:

  • Loan origination – We assess and approve microloan applicants using interviews, credit scores, collateral, and group lending, and assist them with the application process.
  • Loan disbursement – We deliver the approved loan amount to our customers via cash, bank, mobile money, or prepaid cards, ensuring speed, ease, and safety.
  • Loan collection – We collect the loan repayments from our customers as per agreement, using direct debit, mobile money, or cash collection, and monitor the loan performance and contact late customers to prevent defaults and losses.
  • Savings mobilization – We offer and manage savings accounts for our customers who want to save money, with good interest rates and no minimum balance, and easy access and withdrawal options through branches, agents, mobile banking, or ATMs.
  • Insurance provision – We offer insurance products that protect our customers from life, health, property, and business risks, working with good insurance companies to provide cheap and customized insurance plans, and handling the claims and payments for our customers in case of loss or damage.
  • Money transfer service – We offer a money transfer service that allows our customers to send and receive money locally and internationally, working with reliable money transfer operators to provide fast and secure money transfer options, and charging low fees and offering good exchange rates.
  • Financial education program – We run a financial education program for our customers who want to learn more, using workshops, seminars, online courses, or mobile apps, and measuring the impact of our program on customers’ financial behavior and well-being.
  • January 2024 – Launch of our microfinance bank with all the necessary licenses, registrations, and approvals
  • June 2024 – Opening of 10 branches in strategic locations across California
  • December 2024 – Reaching 10,000 customers with a loan portfolio of $5 million
  • March 2025 – Introduction of new products such as insurance, money transfer, and financial education
  • June 2025 – Expansion to new states
  • December 2025 – Reaching 50,000 customers with a loan portfolio of $25 million
  • March 2026 – Adoption of digital technologies such as mobile banking, online platforms, and biometric identification
  • December 2026 – Reaching 100,000 customers with a loan portfolio of $50 million

Financial Plan

Our financial plan provides an overview of our key revenue and costs, funding requirements and use of funds, key assumptions, and financial projections. Refer to our bookkeeping business plan here.

Key Revenue & Costs

Our key revenue sources are:

  • Interest income – The income generated from charging interest on our microloans. We charge an average interest rate of 16% per annum on our microloans.
  • Fee income – The income generated from charging fees for our services. We charge an average fee of 2% per transaction on our services.
  • Other income – The income generated from other sources such as grants, donations, investments, etc. We expect to receive an average of $500,000 annually from other sources.

Our key cost drivers are:

  • Operating expenses – The expenses incurred for running our operations, such as salaries, rent, utilities, travel, marketing, etc. Our operating expenses will be 40% of our total revenue.
  • Loan loss provision – The provision made for potential losses due to loan default or delinquency. We estimate that our loan loss provision will be 5% of our total loan portfolio.
  • Capital expenditure – The expenditure for acquiring or upgrading fixed assets such as equipment, software, vehicles, etc. Our capital expenditure will be 10% of our total revenue.

Funding Requirements and Use of Funds

We require a total funding of $10 million to launch and grow our microfinance bank in the next five years. We plan to raise this funding from various sources such as equity, debt, grants, etc. The following table shows the breakdown of our funding sources and amounts:

Key Assumptions

Our financial plan is based on the following key assumptions:

  • Market share – We will capture 0.2% of our target market by 2026 (100,000 customers)
  • Portfolio growth – Our loan portfolio will grow at an annual rate of 25% ($50 million by 2026)
  • Revenue growth – Our revenue will grow at an annual rate of 30% ($15 million by 2026)
  • Net income growth – Our net income will grow at an annual rate of 35% ($3 million by 2026)
  • Return on equity – Our return on equity will be 20% by 2026

Income Statement

Income Statement - Microfinance Business Plan

Balance Sheet

Assets, Liabilities and Equity Position - Microfinance Business Plan

Cash Flow Statement

Cash Flow Statement - Microfinance Business Plan

Hire OGSCapital for Your Microfinance Business Plan

Writing a microfinance business plan is hard and time-consuming. That’s why you should hire us, OGSCapital. We are a team of leading business plan experts, having helped over 5,000 clients attract over $2.7 billion in financing and achieve their business goals. We have a team of experienced and qualified business plan experts and SBA business plan consultants who have worked in various industries and sectors, including microfinance. We know how to create a compelling and customized five-year microfinance business plan that will meet the expectations of your target audience.

We will also provide strategic advice, market research, financial projections, and graphic design to make your micro loan business plan stand out. Contact us for a free consultation and quote for your microfinance business plan template.

Frequently Asked Questions

How much capital is required to start a microfinance company.

In the US, you may need a minimum capital of $5 million to register as a non-banking financial company (NBFC) microfinance institution. You should have a microfinance institution business plan showing your projected income and expenses for the next five years, or refer to our loan officer business plan .

Is the microfinance business profitable?

Microfinance business can be profitable in the US if you deliver high-quality services that meet the needs and preferences of your target market. You can also use digital technologies or a payday loan business plan to manage costs and risks and show your social and financial impact.

How do I start a microfinance business?

To start a microfinance business, you must identify your target market, choose a specialty of finance, create a business plan, and comply with state and federal regulations. You also need a strategic business plan for a microfinance bank that outlines your vision, mission, goals, and strategies.

OGSCapital’s team has assisted thousands of entrepreneurs with top-rate business plan development, consultancy and analysis. They’ve helped thousands of SME owners secure more than $1.5 billion in funding, and they can do the same for you.

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ProfitableVenture

Microfinance Bank Business Plan [Sample Template]

By: Author Tony Martins Ajaero

Home » Business ideas » Financial Service Industry » Bank

Are you about starting a Microfinance bank? If YES, here is a complete sample Microfinance bank business plan template & feasibility report you can use for FREE .

Okay, so we have considered all the requirements for starting a Microfinance bank . We also took it further by analyzing and drafting a sample Microfinance bank marketing plan template backed up by actionable guerrilla marketing ideas for Microfinance banks. So let’s proceed to the business planning section.

Microfinance banks are small banks that offer loans, savings and insurance to entrepreneurs and small business owners who can’t access traditional sources of capital, like banks or investors. The main objective of microfinance banks is to provide people with money to invest in themselves or their business.

Microfinance banks are different from commercial banks. For instance, funding to commercial banks usually take place through public offers (stock markets) in the form of equity, while Microfinance banks usually receive their funding from individuals/private equity holders in the form of debt.

Also most of the services commercial banks offer are bank door services, which mean the customers’ need to go to the banks to avail themselves such financial services. But most of the services provided by Microfinance banks are door step services, which means the staff of the banks deliver their financial services at client’s door step.

Starting a microfinance bank in modern America won’t be an easy task, but nothing they say can stop the success of a determined mind. Below is a well drafted business plan if you want to start Microfinance bank in the Nigeria .

A Sample Microfinance Bank Business Plan Template

1. industry overview.

Microfinance banks provide microloans to individuals and small businesses. These individuals and small businesses tend to go for loans to be able to pay for the purchase of real estate and other transactions. This demand in turn makes the microfinance bank business a recession-proof business.

According to industry reports, the stages of growth and development of a microfinance industry are usually classified into four segments, for ease of analysis. These are the pioneer stage, the breakout stage, the consolidation stage and the maturity stage.

The requirements for the survival of an industry at each of the different stages of development may differ significantly. And so are the nutrients and corrective action in case of challenges.

Report has it that the Nigerian microfinance industry started officially in 2005 (the International Year of Microcredit as declared by the United Nations) with the release by the Central Bank, of the Microfinance Policy Framework for Nigeria. Note that the practice of microfinance or its precursor, microcredit, has been in Nigeria for a much longer time.

It manifested in the activities of moneylenders, regulated under the Moneylenders Act, and other different forms of rural or informal credit market operations. We believe that the high end of it existed in the form of Non-governmental Organizations (NGOs), governed by cooperative rules and regulations.

Industry pioneers were motivated by the need to help in canalizing financial resources, basically in the form of microcredit, to micro-enterprises that constitute over 90 percent of Nigerian business entities. It is believed that 70% of over 170 million Nigerians live below the poverty line. Evidently therefore, there was a lot to do in the area of the fight against poverty, and microfinance was a fitting instrumentality.

2. Executive Summary

Ambassador Microfinance Bank, LLC (AMB LLC) is a new microfinance bank in Asaba, Delta State, that will provide micro lending and mortgage loan services to small businesses, real estate professionals, builders and individual home buyers.

AMB LLC has access to a full range of microfinances and we offer the right loans–with the best rates, terms and costs–to meet our client’s basic needs. We hope to bring high-quality micro lending and mortgage loan services to residential and business customers scattered all over Asaba.

Our plan at AMB LLC is to create a family like platform at our bank, where customers can feel comfortable to analyze the services they want. We also plan to create a unique work environment that is challenging, rewarding, innovative, and respectful of our customers and employee’s needs.

Asaba is a city strategically located on a hill at the western edge of the Niger River, overlooking its sister city, Onitsha, across the Niger Bridge. This beautiful city is the capital of Delta State Nigeria. A fast developing urban area, Asaba has a population of 149,603 as at the 2006 census, and a metropolitan population of over half a million people.

This city was established during the time of the Royal Niger Company (now UACN) and is currently relishing the status of being the administrative capital of Delta state, but due to the fact that Aniocha-Oshimili people maintain the identity of being Igbo, a lot of Igbo from the east of the Niger river invest in Delta state and precisely at Asaba thus improving the economic fortunes of Asaba area and Delta state in general.

The Delta State government also contributes to the economic development of this city by ensuring an economic platform where small businesses can thrive. Also the construction of a multipurpose dam at Ubu River could be useful in generating electricity.

AMB LLC is created as an L.L.C. in order to avoid double taxation found with a corporation yet realizing the benefits of personal liability avoidance. We will be occupying a standard office facility in the business district of the city, giving us the suitable traffic to attract customers.

We have put plans in place to ensure we mould AMB LLC into the very best in the niche we have chosen. We at AMB LLC have also identified several milestones which will act as ambitious yet achievable goals for the business.

By establishing the goals, the need to reach them will develop an implicit incentive for all members to work hard to achieve the milestones. AMB LLC is capitalized by two principal investors, Mr Innocent Udensi and Mrs Martha Asika. Both are well renowned in the micro lending industry with a combined experience of over 25 years in the industry.

3. Our Products and Services

We at AMB LLC plan to offer unique services within the confines of the micro lending and mortgage loan services. We have analysed our industry and have settled for services we can offer our clients effectively. We have also employed a solid workforce with the specific talents to help us offer these services.

We plan to do everything within the proximity of the law to reach our business goals. Our business offering are listed below;

  • Provide loans to small businesses
  • Providing equipment loans
  • Providing vehicle loans
  • Offer residential mortgages
  • Providing mortgage financing online
  • Providing home equity loans online
  • Providing an online mortgage marketplace
  • Offer commercial and industrial mortgages
  • Providing home equity loans
  • Offer residential mortgages loans online
  • Providing other related loan cum mortgage consulting and advisory services

4. Our Mission and Vision Statement

  • Our vision at Ambassador Microfinance Bank is to build a reliable partnership with individuals, small businesses and corporate clients in Asaba Delta State.
  • We plan to provide better services and be regarded better in all of Delta State.
  • Our mission at Ambassador Microfinance Bank is to provide professional, reliable and trusted microloan services that will help individuals, small businesses, corporate organization, and non-profit organizations to reach their desired goals.
  • We plan to build a business that will become one of the leading microfinance banks in all of Delta State.

Our Business Structure

We at AMB LLC understand that micro finance banks operate in the same way other banks and micro lending services firms do. These financial service institutions get people to invest with them and pay them interest, while lending out that money to people who ask for loans and charge interest on those loans.

We have done our research and have decided to improvise or adopt a business process and structure that will guarantee us good return on investment (ROI), efficiency and flexibility. We have explicitly listed the portfolios we plan to fill and work with at AMB LLC.

We believe that these portfolios will be filled with well experienced and learned individuals, who understand and are ready to align with our company’s visions.

We also hope to hire people that are qualified, hardworking, and creative, result driven, customer centric and are ready to work to help us build a prosperous business that will benefit all our stakeholders (the owners, workforce, and customers).

Chief Executive Officer

  • Business consultant

Human Resource and Admin Manager

Sales and Marketing director

Company accountant

  • Loan officers
  • Debt collectors

Receptionist

5. Job Roles and Responsibilities

  • The Chief Executive Officer will be tasked with providing work direction for the business
  • He will be tasked with building, communicating, and implementing the vision, mission, and direction of AMB LLC – which also includes leading the achievement and implementation of all strategies.
  • The Chief Executive Officer is also tasked with fixing prices and signing business deals for the business
  • He is also in charge of employment
  • He also pays workers salary
  • He signs checks and documents for and on behalf of the agency
  • The Chief Executive Officer also evaluates the success of the organization

Business Consultant

  • Will be tasked with providing residential microloans
  • In charge of providing commercial and industrial microloans
  • Will be obligated to provide home equity loans
  • Also provides equipment loans
  • Charged with providing vehicle loans
  • Providing residential mortgages loans online
  • Is also tasked with fixing micro and mortgage financing online
  • The business consultant is also charged with fixing home equity loans online
  • Provides an online micro and mortgage marketplace for the company
  • Also in charge of providing mortgage related loan cum lending consultancy
  • Oversees the running of HR and administrative tasks for AMB LLC
  • Tasked with Monitoring office supplies by checking stocks; placing and expediting orders; evaluating new products.
  • Makes sure of the operation of equipment by completing preventive maintenance requirements; calling for repairs.
  • Tasked with stating job positions for recruitment and managing interviewing process
  • In charge of organizing induction for new team members
  • Tasked with organizing trainings, evaluation and assessment of employees
  • In charge of arranging travel, meetings and appointments
  • Tasked with overseeing the smooth running of the daily office activities.
  • In charge of organizing external research and coordinating all the internal sources of information to retain the organizations’ best customers and attract new ones
  • Expected to understand, prioritizes, and reaches out to new partners, and business opportunities et al
  • The sales and marketing director is also charged with creating, executing and evaluating new plans for expanding sales
  • Keeps all customer contact and information
  • Represents the company in strategic meetings
  • Aid to increase sales and growth for the business
  • The company accountant is in charge of preparing financial reports, budgets, and financial statement
  • Also provides the managements with financial analyses, development budgets, and accounting reports
  • The company accountant is also tasked with the company’s financial forecasting and risks analysis.
  • Should be able to understand and take care of the firm’s cash management, general ledger accounting, and financial reporting
  • Tasked with developing and managing financial systems and policies
  • The company secretary is also responsible of administering payrolls
  • Ensures that AMB LLC complies with taxation legislation
  • Also take care of all financial transactions for AMB LLC
  • Is the internal auditor for the organization

Loan Officer

  • Communicating to customers why their loan was either approved or denied and providing evidence to back up those determinations.
  • Keeping loan documents and conversations private in order to maintain customer confidence.
  • Staying up-to-date with any changes in the industry by furthering your knowledge of the business through educational opportunities, participating in business-related seminars, and professional networking.
  • Responding promptly to phone calls and emails from customers about their loan or loan application process.
  • Meeting with individuals and businesses in order to accurately analyze their credit, financial status and any property they have.
  • Being able to handle any customer complaints and questions about the loan process and having the ability to fix any lingering issues related to their particular loan.
  • Advising customers and helping them accrue the various copies of individual and business-related financial documents, credit histories and whichever other financial documents are required in order to fulfill the loan requirements.
  • Providing loan applicants with the various types of credit options available and the terms related to those options.
  • Explaining to potential customers the viability of certain loans in relation to an individuals or businesses financial standing.
  • Denying or approving loans based on the specific financial limits of the individual or business and being able to offer alternatives when necessary.
  • Being able to adequately resolve any snags in the mortgage application process.
  • Submitting any and all paperwork related to the loan to credit analysts in order to make sure that loan applicants can get their documents verified and therefore recommended towards the right type of loan for them.
  • Figuring out the different payment scheduling options available to customers, as well as helping to review and update any loan or credit files.
  • Operating with class and adhering to all laws, regulations, and compliance guidelines.

Debt Collector

  • Keep track of assigned accounts to identify outstanding debts
  • Plan course of action to recover outstanding payments
  • Locate and contact debtors to inquire of their payment status
  • Negotiate payoff deadlines or payment plans
  • Handle questions or complaints
  • Investigate and resolve discrepancies
  • Create trust relationships with debtors when possible to avoid future issues
  • Alert superiors of debtors unwilling or unable to pay when necessary
  • Comply with requirements when legal action is unavoidable
  • The receptionist is expected to welcome clients by greeting them in person or on the telephone; answering or directing inquiries.
  • Is tasked with providing all clients with a personalized customer service experience of the highest level
  • Is expected to use every opportunity to build client’s interest in the company’s products and services
  • Be aware of any new information on the company’s products, promotional campaigns etc. to ensure accurate and helpful information is supplied to clients
  • The receptionist will also receive parcels / documents for the company
  • It’s tagged with distributing mails in the organization
  • Handles any other duties as assigned by the Admin manager
  • In charge of the cleaning the floors of AMB LLC facility
  • Keep note and make sure the toiletries and supplies don’t run out of stock
  • Ensures that both the interior and exterior of the firm are always clean
  • Handles any other duty as assigned by the restaurant manager.

Security guard

  • The security guard is in charge of protecting the firm and it’s environs
  • Also controls traffic and organize parking
  • Should also patrol around the building on a 24 hours basis
  • It’s expected to give security reports weekly

6. SWOT Analysis

Our plan as a microfinance bank is to establish well– structured microloan services that will be of good help to our clients. That is why we contacted an experienced consultancy firm, a firm known for its precise way of doing business and also renowned for offering the best.

We employed the services of Jefferson consults to help us conduct a SWOT Analysis in our designated business location. Below is a summary from the result of the SWOT analysis that was conducted for AMB LLC;

According to our SWOT analysis, our strength at AMB LLC rests on the capacity, vision and experience of our team. We can boast of having a team that is prepared to offer our clients the very best; a team that is well placed, professional and ready to pay attention to details and to maximize financial profits for the business.

According to our SWOT analysis conducted by Jefferson Consults, our weakness at AMB LLC will be the time it will take us to break into the market and gain acceptance since we are just a new microfinance bank. But we have designed a marketing plan that will take us through that stage as quickly as possible.

  • Opportunities

We at AMB LLC understand the enormous opportunities in the lending industry, especially judging by the number of people, business startups and corporate organizations who are all in need of microloans to help them reach their individual goals and vision.

AMB LLC being a standard and well positioned Microfinance bank is well prepared to offer microloan and mortgage loan services to see to the needs of this growing target audience.

Jefferson Consults in the SWOT analysis conducted for AMB LLC noted that our threat in this business will include unfavourable government policies, the introduction of a competitor within our location of operation and global economic downturn which usually affects purchasing / spending power.

They went further to advise us at AMB LLC to be aware of huge losses in three situations: due to sharp, sustained increases in interest rates, accounting control fraud, or the collapse of hyper-inflated residential real estate bubbles. That is why to mitigate these threats, we have introduced the use of credit scoring software and we have created counter plans for each possible threat.

7. MARKET ANALYSIS

  • Market Trend

We at AMB LLC understand that the formal introduction of a national policy on microfinance would change a lot of things in the industry. It will legitimize the illegal operators; and encourage the inflow of capital funds to the sector. That is why some of the pioneer institutions in the industry have transferred their already public positive attributes to become industry leaders.

LAPO microfinance is still the number one player in this field creating wealth and blazing the trail. We at AMB LLC believe that policy objective at the pioneer stage of the industry should centre on the promotion of stability and confidence.

Regulation should be strict and transparent or at least evoke the image of transparency, while intervention is swift, all in a bid to win popular confidence of stakeholders.

Experts in the industry expect a huge expansion in the number of participants. This is strategically driven by the level of success achieved by the pioneers. Being a monopolistically competitive market, the fairly easily achievable conditions for entry (licensing) enable profit-seekers to come and compete for the presumed profit available in the sector.

According to statistics, Nigeria now has over one thousand microfinance banks and several providers organised as NGOs. This is a clear indicator that the industry in Nigeria is attractive to investors who are willingly staking their capital.

8. Our Target Market

Our first aim at AMB LLC is to serve small to medium sized business, from new ventures to other bigger businesses and individual clients.

We plan to be decisive in all steps and approach our market one step at a time. We at AMB LLC plan to offer the best possible microloan services, hence we’ve made sure all our employees are well trained and equipped to serve a diverse range of clientele base.

Our target audience at AMB LLC will cut across businesses of different sizes and individuals. Outlined below is the list of businesses and organizations that we have categorically designed our products and services for;

  • Small businesses
  • Individuals and interested home owners
  • Real Estate companies and investors
  • Non-governmental organizations
  • House of worships and other religious organizations
  • Educational institutions
  • Corporate companies

Our competitive advantage

We at AMB LLC understand that the level of competition in the microfinance banking industry does not in any way depend on the location of the business since most micro finance banks and other microloan businesses can operate online and from any part of the world and still effectively compete in the industry.

We have made plans to ensure we penetrate the market and offer our customers what they really want – easy access to microloans; thereby deleting the hard and long process needed to obtain loans from the bank and other financial institutions.

Another advantage we have in this industry is the quality and experience of our workforce. The owners, down to every employee at AMB LLC, are all well trained to function well in the microfinance industry.

We have also, through the help of Jefferson Consult, established a comfortable business environment for our employees by offering work bonus and loyalty bonus which will be calculated with more or less 10 years duration. This we believe will push our employees to give their all and stay loyal to the business and also help build a classic competitive microfinance bank.

9. SALES AND MARKETING STRATEGY

  • Sources of Income

AMB LLC was established to serve a specific need in the industry and to also generate substantial revenue. Although our goal at AMB LLC is customer satisfaction in the microloan business, but as a business, we want to make profits and grow our enterprise.

We plan to generate income by offering the following microloan services to individuals, real estate companies, NGOs and corporate organization. We plan to maximize profits by offering the following services;

  • Provide equipment loans
  • Provide vehicle loans
  • Provide mortgage financing online
  • Provide home equity loans online
  • Provide an online mortgage marketplace
  • Provide home equity loans
  • Provide other related loan cum mortgage consulting and advisory services

10. Sales Forecast

Our sales forecast at AMB LLC was conducted in a conservative fashion to avoid any inflated expectations that might not be obtainable. We acknowledge that the first few months of business will be slow. AMB LLC has projected steady, incremental growth in sales.

This can be explained as a function of the increased proficiency in terms of sales for AMB LLC services as well as the growing awareness of AMB LLC by the target customers.

Reviewed below is a detailed sales forecast for AMB LLC, which we believe and hope we will surpass with hard work and perseverance. This sales forecast is also based on the location of our business and the innovative business we will be offering to our clients.

  • First Fiscal Year: N1, 650,000
  • Second Fiscal Year: N2, 590,000
  • Third Fiscal Year: N4, 328,000
  • Marketing Strategy and Sales Strategy

Our marketing effort at AMB LLC will focus on our ability to empower people to make a substantial difference in their world while getting a great return on their money. We plan to make use of magazine advertisements and community based marketing (networking, sponsorship and participation in seminars) to grow our business visibility.

We plan to make our advertisements steady so that people will become aware of the investment options we offer at our bank. We will participate in numerous on-topic events and seminars that will display AMB LLC as experts as well as give us a podium to describe our different services. We hope to make use of the listed strategies to build our business;

  • We plan to introduce AMB LLC by sending introductory letters with our business brochure to individuals, households, corporate organizations, schools, players in the real estate sector etc
  • We also plan to advertise AMB LLC in important financial and business related magazines, newspapers, TV and radio stations
  • We also plan to attend important international and local real estate , finance and business expos, seminars, and business fairs et al
  • We also hope to create different packages for different category of clients (individuals, startups and established corporate organizations) in order to work with their budgets
  • We also plan to make use the internet to promote our business
  • We hope to encourage word of mouth marketing from loyal and satisfied clients

11. Publicity and Advertising Strategy

In order to achieve our publicity and awareness goals, we at AMB LLC have contacted the services of Stella Maris Advertising Experts, a renowned venture in business development and publicity, to help us create publicity and advertising strategies that will help us at AMB LLC to attract and keep our target audience interested. Listed below is the summary of capable strategies suggested by Stella Maris Advertising Experts for AMB LLC;

  • Place adverts on both print (community based newspapers and magazines) and electronic media platforms; we will also advertise AMB LLC on financial magazines, real estate and other relevant financial programs on radio and TV
  • Sponsor relevant community based events
  • Leverage various online platforms to promote the business. This will make it easier for people to enter our website with just a click of the mouse. We will take advantage of the internet and social media platforms such as; Instagram, Facebook , twitter, YouTube, Google + et al to promote our brand
  • Place our billboards in strategic locations all around Asaba – Delta State.
  • Share and distribute our fliers and handbills in target areas all around Asaba
  • Ensure that all our workers wear our branded shirts and all our official vehicles are branded with our company’s logo.

12. Our Pricing Strategy

It’s very important to state that the microfinance industry is moved by the increase in demand and availability of real estate / properties. That is why there can never be a price model that will be suitable for the general lending industry. Indeed the prices for properties and human needs fluctuate on a regular basis.

We at AMB LLC also understand that most lending firms rely on commissions since they serve as middlemen between those seeking for microloans and the secondary financiers. But we hope to establish a more direct approach by offering those loans ourselves which can be very possible due to the large incentives our founders are willing to inject.

Our plan is to keep the prices of our services and commissions below the average market rate for our clients for the main time.

We also hope to provide them with loans coupled with low interest rates that will bring them closer to the bank, and we hope to move our prices a little higher when we have achieved a substantial corporate identity in the microfinance business.

  • Payment Options

We at AMB LLC have concluded plans to provide a wide variety of payment options for our clients. We understand the need and the diverse countenances of people, and we plan to provide a suitable platform that will suit all equally. We have chosen a well renowned bank in the Nigeria to help make payment easier for our clients.

We have chosen and opened a corporate current account with Capital one financial Corporation. Our bank account numbers will be made available in website and promotional materials to clients who may want to make cash deposit and it will also be given to clients on request. Listed below are the payment options that we will make available to AMB LLC.

  • Payment through bank transfer
  • Payment through online bank transfer
  • Payment with check
  • Payment with bank draft
  • Cash payment to debt collectors

13. Startup Expenditure (Budget)

The need for funds can’t be overlooked in the type of services we plan to offer at AMB LLC. We understand that we need funds to put together a competitive business, especially in Nigeria. We need funds to get a phone system, workstation computers, back end server, DSL Internet connection, and laser printer.

Funds are needed to get office furniture, meeting room and waiting room furniture; to settle monthly service charge for KDB software, purchase a Fax machine, copier, lighting, and assorted office supplies. We have analyzed our needs and we plan to spend our startup funds judiciously. Outlined below is a detailed financial projection and costing for starting AMB LLC;

  • Price of incorporating the Business in the Nigeria of America – N15,000.
  • Our budget for basic insurance policy covers, permits and business license – N200,000
  • Acquiring a suitable Office facility opposite the city hall at Asaba Delta State (Re – Construction of the facility inclusive) – N175,000
  • The budget envisaged for capitalization (working capital) – N20 million
  • Budget for settling other legal processes (acquiring business license and all city dues et al) – N20,500
  • Equipping the office with suitable and standard equipment(computers, software applications, printers, fax machines, furniture, telephones, filing cabins, safety gadgets and electronics et al) – N110,000
  • Purchasing of the required software applications (CRM software, Accounting and Bookkeeping software and Payroll software et al) – N10,500
  • Launching AMB LLC official Website – N16,000
  • Our expenditure for paying at least three employees for 3 months plus utility bills – N120, 000
  • Other Additional Expenditure (Business cards, Signage, Adverts and Promotions et al) – N40,000
  • Miscellaneous: N80,000

With the above detailed cost analysis , we need N5m and N20 million working capital to successfully set up AMB LLC.

Note-: This cost is rather on the low-end as we didn’t factor in the cost of obtaining CBN license for a Microfinance bank, which can either be N20million or N100million or N1billion ; depending on the size and operational style of your Microfinance bank.

  • Generating Startup Capital for AMB LLC

AMB LLC is a licensed and registered Microfinance bank which is capitalized by two principal investors, Mr Innocent Udensi and Mr Martha Asika.

Our founders plan to become the very first financiers of the business, although we have plans of accepting partners at a very ripe and mature stage in the business. Due to less constraint in financing AMB Mortgages, we have outlined the few ways we can acknowledge funding and startup capital. These ways may include;

  • Generate part of the startup capital from the two principal investors
  • Accept soft loans from family members and friends
  • Agreeing to angel investors
  • Apply for business loan from the bank (if need be)

Note : AMB LLC has been able to generate an enormous N5 million from its two principal investors, who aligned and individually dished out N2,500,000 each. We have also aligned with an angel investor to inject N20 million into AMB LLC, with the hope of making profits and establishing a solid business.

14. Sustainability and Expansion Strategy

It is the goal of every business venture to grow and remain consistent in making profits and acquiring customers. The baseline of every business lies in the number of loyal customers in their clientele base and the competence of their employees, investment procedures and the business structure they choose. We at AMB LLC understand our market and we have established plans that will carry us thus far.

We believe with our unique business structure and competent hands will be able to help us make the right decisions and start making profits from our forts year in business. We also understand that one of the strategies of gaining approval and winning customers over is to offer innovative services to our customers at a more affordable rate than what is obtainable in the industry.

We have also made sure that we established the right platform, structures and processes. We plan to make sure all our employees are well catered for and presented with an environment that will help them stay innovative and current. AMB LLC will be run and managed like a family with excellent values and ethics.

We have also put together a profit-sharing arrangement which will enable our management staff enjoy the fruit of their labour.

This arrangement will be decided upon during a considerable duration of 5 years and upon decision of the board of the organization. With these and many more attractive employees focused incentives, we hope to hire and retain employees that are the best in any field they are hired for.

Check List/Milestone

  • Business Name Availability Check:>Completed
  • Business Incorporation: Completed
  • Opening of Corporate Bank Accounts: Completed
  • Opening Online Payment Platforms: Completed
  • Application and Obtaining Tax Payer’s ID: In Progress
  • Application for business license and permit: Completed
  • Purchase of Insurance for the Business: Completed
  • Conducting feasibility studies: Completed
  • Leasing, renovating and equipping our facility: Completed
  • Generating part of the startup capital from the founder: Completed
  • Applications for Loan from our Bankers: In Progress
  • Writing of Business Plan: Completed
  • Drafting of Employee’s Handbook: Completed
  • Drafting of Contract Documents: In Progress
  • Design of The Company’s Logo: Completed
  • Printing of Promotional Materials: Completed
  • Recruitment of employees: In Progress
  • Purchase of the Needed software applications, furniture, office equipment, electronic appliances and facility facelift: In progress
  • Creating Official Website for the Company: In Progress
  • Creating Awareness for the business (Business PR): In Progress
  • Health and Safety and Fire Safety Arrangement: In Progress
  • Establishing business relationship with banks, financial lending institutions, vendors and key players in the industry: In Progress

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THE COSMOPOLITAN MICROFINANCE BANK LIMITED Revised Business Plan Port Harcourt, Nigeria

Profile image of kanu OKEZIE

A British trained Engineer, Mr. Darwish has been involved in engineering construction in Nigeria for over thirty years. He is bringing on board his wealth of experience as a manager of men and materials.

Related Papers

Prof. Onafowokan Oluyombo

Microfinance bank is fast becoming a household name globally due to its acceptance as a means of reaching those that were not served by the conventional big banks. However, the concept and practice of Microfinance bank is still a novelty in Nigeria. This paper examines different concept of Microfinance as well as the origin of this sustainable finance idea. Salient issues that need to be considered by the government, regulators, operators and the general public were examined and further make relevant recommendation that will accelerate the growth of this type of banking in Nigeria.

microfinance bank business plan pdf

Ikechukwu Acha

edwin .m. egboro

Undergraduate Research Work

Hannah Olaoye Williams

This study discussed the problems and prospects of microfinance banks in Nigeria, taking into consideration two case studies; Solid Rock Microfinance Bank located in Ogun State and Common Benefit Microfinance Bank located in Lagos State. A total of 55 respondents (managers and staff) were chosen as samples using purposive sampling technique. Data obtained from the respondents were analyzed using simple percentages. Hypothesis formulated was tested using regression analysis with the aid of SPSS (Statistical Package for Social Sciences). The study aimed at finding out why there has been deviation by operators of this sector from the set objectives of CBN some of which are: to increase employment in the country, mobilize deposits of the poor, increase participation of the poor in socio-economic development. The study specifically tested the impact of loan portfolio on the profitability of the banks. The study revealed among other things that there is a significant negative relationship between non performing loan portfolio and profitability, microfinance banks are undercapitalized and that micro finance banking can improve and be sustained in the Nigerian economy. It was recommended that proper internal control and risk management procedure should be documented and implemented to effectively analyze loan application before disbursement of money so as to ensure optimum performance of the banks.

Ifeanyi Nwachukwu

kabasha marc

Jazuli Lawal

ABSTRACT The study presented empirical findings on the nexus among microfinance banks, employment and income generation in Kano State, Nigeria. In Nigeria, the unemployment rate measures the number of people actively looking for a job as a percentage of the labor force. As per the report of the World Bank, the GDP at purchasing power parity of Nigeria was $170.7 billion during 2005.The secondary-school graduates consist of the principal fraction of the unemployed accounting for nearly 35% to 50%. The rate of unemployment within the age group of 20 to 24 years is 40% and between 15 to 19 years it is 31%. It is a demonstrated fact that through variations in the supply of finance, it is possible to influence the level of national income, employment, standard of living and social welfare. The importance of finance development depends upon the desired nature of development. Given the real resources, and suitable attitudes, a well-developed financial system can contribute significantly to the acceleration of economic development. Microfinance is an offshoot of the emerging trends in Nigeria. Therefore the main aim of this study is to examine the nexus among microfinance banks, employment and income generation in Kano State. Primary data were used for this study. The target population was all the microfinance banks in Kano State. The choice of the study area was based on concentration of microfinance banks. Data were collected using questionnaires from a sample of 150 customers of the microfinance banks. The selection of respondents was done using two stage stratified sampling procedures. In the first stage, three local governments with highest concentration number of microfinance banks were selected. In the second stage using systematic sampling on the list of all the microfinance banks in the selected local governments, a total of 2 microfinance banks were selected systematically from each local government area in the three LGAs in Kano State. The data collected were analyzed using appropriate descriptive statistics and inferential techniques. Specifically, logistic regression model, a binary choice technique was employed. The results showed that 88.33% of surveyed customers operating accounts with the banks sourced their initial working capital from friends, relatives and personal savings while only 12% of the respondents had access to loan from the Microfinance Banks. The results also showed that only 32.33% of the respondents have access to credit facilities, while 68.67% had no access to loans from the MFBs. The results showed further that in the first employment model, Age, Business Type and Average Monthly Income have shown positive coefficients, while Education, Marital Status, Dependents and Gender were found to be negative. While the income model has shown that, only saving culture, and awareness have positive relationship which implies people lacked saving culture. The result concluded that there is no significant linkage between the activities of microfinance banks, employment and income generation in the studied area. Perhaps the only link could have been through the provision of credit facilities to the SMEs customers and other borrowers who in turn would expand their businesses that could lead to employment and income generation. As such, the researcher recommended that, matching products to client’s needs, increase services to vulnerable non-poor households, increase individual savings opportunities, incentives and increase government support to MFBs and public awareness campaign on the activities of MFBs would assist in achieving the desired objective of microfinance banks

International Journal of Finance & Banking Studies (2147-4486)

ERNEST UGIAGBE

Prof. Francis O . Nwankwo , Socialscientia Socialscientia , Okenwa Cyprian

Enhancing Financial Innovation and Access (2014) report 40% of Nigeria's adult population is financially excluded. Much of this proportion includes the poor and the financially weak living in the rural areas and the urban fringes. The Micro Finance policy of the Nigerian government was intended to convert existing community banks that meet certain criteria into microfinance banks (MFBs), so as to offer services that appeal to the financially excluded adult Nigerians and bring them into the mainstream financial system. The performance of MFBs between 2007 and 2011 appears to suggest that progress is being made. The assets and liabilities of the MFBs had rose to N190.7 billion from just N55.1 billion in 2006. The loans and advances given by MFBs also increased from a mere N16.0 billion in 2006 to over N67.6 billion at end-December 2011. Moreover, the asset base of MFBs has been projected to 120 billion by the year 2010. MFBs could have done more but for a myriad of challenges that affect their operations such as poor risk management processes, dearth of infrastructure, high cost of operations, among others. It is on this premise that the paper suggest that the government should do more to create an enabling environment that will enable MFBs to thrive and grow; employment of qualified staff who are sufficiently motivated; and regular staff training to expose staff to strategies that are critical to micro financing, etc.

Dr. Ademola Sajuyigbe

This study examined the role of microfinance institutions on the performance of women entrepreneurs in south western Nigeria. The specific objectives were to examine the pattern of financial products made available by microfinance institutions and rendered to women entrepreneurs, to investigate the degree of accessibility of microfinance institutions products by women entrepreneurs, to identify the problems encountered by microfinance institution operators in financing women entrepreneurs and to determine strategies to improve access to microfinance products/ services by women entrepreneurs. The research work was carried out among the licensed microfinance institutions and registered women entrepreneurs in the SouthWestern Nigeria. Purposive and simple random sampling techniques were employed to select a total number of one hundred and twenty five (125) microfinance institutions and six hundred and eight (680) women entrepreneurs as sample size for the study. Data analyses were performed with the aid of descriptive statistics. The result confirmed that only overdraft; savings account and current account, business loans, fixed deposit, financial advisory, daily contributions, fund transfer and execution of standing order were the most available financial products/services to customers but women entrepreneurs in Nigeria did not have access to majority of these products/services due to conditions attached to them. Result also revealed that delay in repayment of loans, lack of business plan, diversion of the loan granted and lack of banking culture are the most challenges confronting microfinance institutions in women entrepreneurship financing in Nigeria. The study concluded that women entrepreneurship financing can only be improved through reduction of interest rate, relaxing the conditions attached to loans, bring MFIs closer to the people, sensitize more women about MFIs, give priority to rural women, assisting women entrepreneurs in preparing business plans, and increase payback period.

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Business Planning for Microfinance Institutions

Full report.

The ‘Business Planning’ course one of the four courses in the Operational Management Curriculum, along with ‘Product Development’, Information Systems’ and ‘Operational Risk Management’. The original five-day course guided participants through the process of strategic and operational planning and to develop the financial planning skills necessary to the long-term health of an MFI. The present version of the course has been significantly cut back from the original course launched in 2002 and includes all the sessions of the original course that precede using Microfinance to do financial modeling—namely, defining institutional mission, goals and objectives, understanding clients and markets, carrying out environmental and institutional assessments and designing a strategy.

Training Materials:

Business Planning for Microfinance Institutions Participant Materials: Trainer Notes Business Planning for Microfinance Institutions Participant Materials: Handouts Business Planning for Microfinance Institutions Overhe ads

CGAP is pleased to make the course materials from the CGAP Skills for Microfinance Managers course series publicly available. Although the course materials have been well tested and revised CGAP cannot ensure that the materials and all calculations are fully accurate. The latest update of these materials was done in 2012-13 to include dimensions of client protection and social performance management. The microfinance industry continues to evolve and new standards continue to emerge. As a result, the course materials may not reflect the latest practices in the microfinance industry. Although CGAP has made every attempt to produce high-quality course materials, ultimately it is the technical skills, training experience and preparation of the trainers that guarantee the quality of the course itself and the successful transfer of skills and knowledge to course participants.

Please note that CGAP recognizes only those partners and trainers that went through its certification process as CGAP training partners from 1997 to 2008. Others who offer a course using materials from one of the CGAP Skills for Microfinance Managers courses should not refer to themselves as CGAP trainers or CGAP-certified.

CGAP also requests that all those who offer the Business Planning for Microfinance Institutions course use the following text in their marketing materials and course descriptions: “The Business Planning for Microfinance Institutions course is based on the materials developed by CGAP that are publicly available on www.cgap.org. CGAP is a leading independent resource for objective information, expert opinion, and innovative solutions for microfinance. CGAP works with the financial industry, governments and investors to expand access to financial services for poor people around the world.”

Related Research

Banking in layers: five cases to illustrate how the market structure for financial services is evolving, tymebank case study: the customer impact of inclusive digital banking, getting repaid in asset finance: a guide to managing credit risk.

From Sub-Saharan Africa to the Indian Subcontinent, asset finance and leasing companies are doing invaluable, innovative work to finance critical assets for low-income and informal borrowers.

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Microfinance Bank Business Plan in Nigeria

Microfinance Bank Business Plan in Nigeria PDF Download

Microfinance Bank Business and Financial Plan

Our Microfinance Bank Business Plan in Nigeria is well documented and can also be used for, but not limited to:

  • Grant Applications,
  • Bank Loans,
  • Proposal writing,
  • Business Concept Note,
  • Competitions e.t.c

Purpose of the Microfinance Bank Business Plan in Nigeria

The Microfinance Bank Business Plan in Nigeria will be of great use:

  • To formulate a strategy for starting and growing the business or existing business by identifying where the business is going and how to get there.
  • To test the viability of the business idea and maximize its opportunities.
  • To Obtain funding and achieve business goals and success. e.t.c

Benefits of the Microfinance Bank Business Plan in Nigeria

The Microfinance Bank Business Plan in Nigeria in beneficial because

  • It helps in outlining the steps needed to achieve the business goals and ideas.
  • It helps to articulate strategy to stakeholders who support the business.

Importance of the Microfinance Bank Business Plan in Nigeria

The Microfinance Bank Business Plan in Nigeria is important because

  • It will assist you in making sound decision in the administration of the commercial enterprise which will make a contribution to the success of the business.
  • It will additionally gives distinctive statistics on all components of the business, outlining the business desires and the steps required to achieve them.

Content of the Microfinance Bank Business Plan in Nigeria

  • Executive Summary
  • Introduction
  • Business Description
  • Keys to Success
  • Products and Services
  • Market Analysis
  • Our Target Market
  • Pricing Strategy
  • Competitor Analysis
  • Sales and Marketing Plan
  • SWOT Analysis
  • PEST Analysis
  • Operational Plan
  • Management plan
  • Financial Plan and Projections
  • Financial Diagnostics

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FOR STARTING A MICROFINANCE INSTITUTION IN TANZANIA

Dar-es-Salaam

Table of Contents 1. INTRODUCTION AND BACKGROUND ..................................................... 3

1.1. Executive Summary .......................................................................................... 3 1.2. Mission and Goals ............................................................................................ 3 1.3. Macroeconomic Economic Situations in Tanzania .......................................... 4 2. MARKET AND CLIENTS .............................................................................. 5 2.1. Market ............................................................................................................... 5

2.2. Microeconomic Background ............................................................................ 5 2.3. Clients ............................................................................................................... 7

3. Business Environment Analysis ....................................................................... 9

3.1. Competitors ...................................................................................................... 9 3.2. Opportunities and Threats .............................................................................. 11 4. CORRABORATION AND PARTNERSHIP ................................................ 12 4.1. Global Network .............................................................................................. 12 4.2. Cooperating Partnerships ............................................................................... 12

4.3. Regulatory Policies ......................................................................................... 13 4.4. Transformation into a Microfinance Company (MFC) .................................. 14 5. INSTITUTIONAL ASSESSMENT ............................................................... 15 5.1. Credit and Savings Program ........................................................................... 15 5.2. EEA's Marketing Channel .............................................................................. 17

5.3. Board and Management .................................................................................. 20 5.4. Roles and Responsibilities of the Board Managements ................................ 22 5.5. Institutional Responsibility and Capacity ....................................................... 22

5.6. Risk Management and Controlling ................................................................. 28 5.7. Financing Strategy .......................................................................................... 28

6. FINANCIAL PROJECTIONS ....................................................................... 32

1. List of Global Advisory Board ....................................................................... 36

2. Job Descriptions ............................................................................................. 37

3. Characteristics of the Target Audience .......................................................... 37

1. INTRODUCTION AND BACKGROUND

1.1. Executive Summary

Empowerment Enterprises of Africa (EEA) was incorporated as a non-profit organization

under the laws of the United Republic of Tanzania in 2008. Its headquarters are located in

the capital, Dar-Es-Salaam. The organization was formed with the purpose of providing

social and financial solutions to the poor. The existent business plan provides a rational

framework for the microfinance part of EEA.

The Company was founded by Dr. Jasson Kalugendo and Jerry Twombly who, along

with Dirk Sander, are actively managing the company. EEA has already started a micro

lending pilot project in Dar-City and has scheduled to roll it out to 200 families in

Gongolamboto (underserved area in Dar-Es-Salaam city), by the end of 2009, in

collaboration with other stakeholders. The EEA intends to use Grameen Bank model,

developed by Nobel Peace Award winner, Muhammad Yunus.

EEA intends to reach out to 10,000 poor families in Tanzania with microloans in the next

five years in Gongolamboto, Kinyerezi, Chanika and Kigamboni. Achieving this goal

EEA will expand its business in 2013 to Dakawa, Morogoro Region. EEA management

philosophy is to gain self sufficiency within five years. For that purpose, the management

restricts the fundraising portion with a declining percentage of 100% in year one down to

55%, in year two, 50% in year three and 30% in year four. In 2014, EEA does not expect

to require any more grants.

This document wont be possible without the hardworking of Dirk Sander, a holder of MBA in Accounting and Controlling. Dirk has invested a great deal of his time and

resources to develop this important document because of his passion to those who live

underserved conditions in Tanzania. EEA Governing Board is grateful to his support.

1.2. Mission and Goals

EEA exists to empower people economically while ensuring that those who live in

poverty, particularly vulnerable women and children, are served in body, mind, and spirit.

The springboard of EEA is compassionate micro-finance lending that includes a range of

support services for its members through multiple local programs in strategic rural and

urban areas of Tanzania, and will eventually spread to other countries in Africa. By 2025,

EEA expects to empower the entire population of one million Tanzanians to move out of

extreme poverty through strategic goals:

a) Microfinance. This includes urban and rural lending, community owned banking, and asset development strategies.

b) Community Investment. This comprises consumer-owned businesses, social businesses, and social investment.

c) Entrepreneurial of Entrepreneurship. This involves small-business development, hands-on learning, technical know-how culminating in self-employment, and life

skills development.

d) Dynamic social network. This involves sharing resources, local and global interdependence, and mobilization of social networks.

As a Microfinance Institution, EEA intends to increase opportunities for the poor to

access financial services by providing financial services to low income entrepreneurs,

mobilizing deposits from members and non-members and then loaning a certain

percentage of these funds to urban and rural producers, traders and small scale farmers.

EEAs core values are enhancing their clients self-determination, serving as an ongoing financial resource for members, and achieving significant outreach and financial self-

sufficiency.

1.3. Macroeconomic Situation in Tanzania

The United Republic of Tanzania is situated in East Africa and part of the Sub-Saharan

area with a total surface of 945.087 square kilometers and a population of 40,3 million

(Mainland and Zanzibar). The country gained its independence in 1961. In 1990, the

mainland of Tanzania initiated a political transformation process to a multi-party system.

Between 1999 and 2002 the economy picked up by an average of 6 % and by 2007 the

growth rate (7.1 %) was comparable to the early years of independence (URT - United Republic of Tanzania, 2008).

The inflation rate has been relatively stable during the last seven years with an average of

7% but it has increased significantly during the last 6 months, with a growth up to 11.3%

in April 2009 (BOT, 2009). The population living below the poverty line (income is

under one dollar a day) was 35.7 % in 2000/01. About 80 % of the population in Tanzania

lives in rural areas with agriculture being their main activity (Morrissey et al., 2005). In

2002, the agricultural sector in Tanzania contributed around 45% to the GDP (Gross

Domestic Product), of which subsistence farming accounted for 20 and 81% of GDP and

total employment in Tanzania, respectively. The sector has maintained a steady growth

rate of 3% and is said to be a major accelerator of economic growth. Despite the sectors contribution to the economy, its growth rate is seen as insufficient to improve the

livelihood of the rural people as the rural areas account for around 80% of the 17 million

people living below the poverty line (Wangwe and Lwakatare, 2004). In 2000/01, 39% of

the population living in rural areas in Tanzania was below the basic needs poverty line,

compared to around 26 % in urban areas excluding Dar-Es-Salaam.

The impacts of a socialistic one-party government system led to a decline of old

traditions, melting of social ties, and timidity to engage in self-employment or

entrepreneurship. These were some of the primary reasons for the poverty. The main

political objectives in the last decade have been, therefore, the development of a national

economic growth and poverty reduction strategy initiated by the World Bank and IMF

(International Monetary Fund). Tanzania enjoys political stability though the physical

infrastructure and functioning executive, legislative, education, health, and juridical

systems are poorly developed. Recently, the government has policies and regulations in

place to maximize the utilization of domestic and international resources in a strategy to

reduce poverty and eliminate social problems in the country.

A very serious problem for Tanzanian society is the HIV/AIDS epidemic. The country

has high rate of infection with around 6% of population ages 15-49 carrying the disease

(WBCR, 2009). According to the Health Sector Performance Profile report provided by

the Tanzanian government, the costs of treating AIDS cases could easily consume half of

the countrys health budget, a factor that slows down the countrys strategic efforts on poverty alleviation.

2. MARKET AND CLIENTS

2.1. Market

According to a study of PRIDE (Promotion of Rural Initiative and Development

Enterprises), a major microfinance oriented NGO, it is estimated that there are close to eight million small and micro entrepreneurs who need financial services, and the number

is growing by 4% percent annually, the majority of whom are found in the rural areas (PRIDE, 2009). That is 20% of the countrys population, mainly dealing in the informal sector.

At the beginning of their microfinance activities, EEA is focusing on the urban informal

sector. This sector contributes 43% of the country GDP. Also it contributed 35% to the

total urban labor force (URT, 2003). In Dar-Es-Salaam Region, the informal sector offers

about 65% of the city's labor force (URT, 1995). Nearly two of three urban households

own informal enterprises (URT, 2003).

EEA decided to boost informal sector by providing financial services to their actors.

Although there are contradicting views regarding the relationship between poverty and

the informal sector, without it, the poverty situation of the affected families would have

been much worse (Orlando, 2001). At the beginning, EEA selected four underserved

target areas for their credit program to informal micro entrepreneurs. All are situated in

Ilala, one of three districts of Dar-Es-Salaam Region.

Furthermore, EEA is chiefly committed to empowering the communities in rural areas

because of the fact that their access to financial services is extremely limited. The initial

community to be reached during the pilot phase is Dakawa, a village in the Morogoro

Region, 300 km away from the EEA Head Quarter in Dar-Es-Salaam City. For further

detailed information regarding demand, market penetration and opportunities, see section

3.1 Competition.

2.2. Microeconomic Background

Gongolamboto

Gongloamboto is one of the wards of the Ilala Municipal with an estimated total

population of 15,000 people. The Ilala Municipal belongs to Ilala one of three districts in

Dar-Es-Salaam. The district includes an estimated 783,687 people found in 65 wards and

102 sub-wards (URT Dar-Es-Salaam City Profil 2004). The area of Ilala is 273 km and

is about 20 km away from Dar-City, where much of the commerce, banking and national

offices are located.

Despite the high urbanization rate of Dar-Es-Salaam Region (93.9 % Morogoro, 2007) and the narrow to the capital, the Ilala District is defined as an urban agriculture sector.

Only a quarter of an entire population is involved in non-agriculture, mainly in the

Informal Sector (95 % URT, 2008). Typical small scale businesses include: street vendors, shop sales workers, and crafts men. Majority of people work in petty cash

businesses in which they can buy only the food of the day. Although the poverty rate is

only the half of the country average, Ilala residents do not have savings for retirement,

medical expenses, life insurance, or plan for sending children to school.

Agriculture activities are based on small and large scale crop farming mostly using poor

hand equipments. GDP per capita for Dar-Es-Salaam is to be USD 437 with 35% of the

population earning an average low income of USD 24 per month (URT - Dar-Es-Salaam

City Profile, 2004).

From Gongolamboto EEA will expand their business later to Chanika with 23,000 and

Kinyerezi with 5,800 resident, and the forth area in Ilala will be Kivukoni with an

estimated population of 50,000.1

Dakawa is a small village that is located along the Morogoro Dodoma highway. The village is found in Mvomero district which is among the six districts of Morogoro region.

The regions country size is about 73.000 km2 with a total population size of 1.7 Million

people. Morogoro GDP is 5.39%, so that the region ranked eighth out of 21 regions

(URT, 2006). The per capita GDP of Morogoro Region is USD 311. The relatively well

growing economy is reflected in a surplus of 4.1 % in-migration (Morogoro Regional

Commissioners Office, 2006).

The total human population in the Mvomero district was estimated to be 280,475 people

in 2006 (URT, 2007), and this accounts for a population density of 37.9 persons/km2.

This is relatively low as compared to the average of the Mainland. About 40% of the

population is in the reproductive age (15-44 year old). Mvomeros urbanization level is very low. Only 11.5% of the district population is living in urban areas (Morogoro

Regional Commissioners Office, 2006). The main industry of the labor force depends on

agriculture (90%).

1 Kivukoni has a special status, because of its high population density and the fact that 15 MFIs including

NMB have their offices and branches within this ward. Half of the underserved micro-entrepreneurs in the

four target areas are living and working in Kivukoni. The microfinance market is a growing sector and

attracts more competitors. Because of a relatively proper infrastructure and their high population density,

Kivukoni is one of the most attractive markets in the Dar-Es-Salaam Region - foremost for commercial

Banks that can easily expand their business to this ward. This is a significant market risk for new players

with minimum initial infrastructure like a start up. That is why EEAs implementation plan puts Kivukoni in forth priority.

The major economic activity in Mvomero district is crop farming, employing 81% of the

total labor force. But only 2.1% of the crop farming production is sold (National Sample

Census of Agriculture 2002/2003). Banana, cassava and maize are among the major food

crops grown in the District. Sugarcane, coconut and sesame are among the major cash

crops. Coconut and sesame are sold generally by the smallholders. Due to the rainfall

seasons between November and May, half of the crop selling farmers store crops for three

to six months. There is a high variation of the price within the region that indicates

inefficiencies of the crop marketing system. For instance, the price for sesame varies by

Tsh 500 between Kilosa and Morogoro District. Other occupations that employ a

significant number of the labor force include livestock, crafts, small business, street

vendors, professional jobs and other elementary occupations.

Smallholders are the main keepers for chicken, cattle, goats, and dairy cattle in Mvomero.

The largest proportion of all livestock kept is chicken (55.5%), followed by cattle (22.6%)

and goats (18.6%). The proportion of dairy cross cows accounts for approximately 50%

of dairy products in the region. Dakawa village, which is situated in the Mvomero

District, is 40 km away from Morogoro Municipal. There are about 7,000 residing in

Dakawa. Despite the fact that Dakawa is more than two times larger than the average of

the villages in Mvomero District, the distribution of occupation of the labor force and the

industry is comparable with the district figures.

Special market opportunities in Dakawa The Rural Livelihood Development Company (RLDC) is engaged to boost organic cotton

farming in the Morogoro Region. RLDC is a NGO funded by the government of Tanzania

in cooperation with Swiss Government through Swisscontact. RLDC is looking for

Microfinance Institutions (MFI) extending micro-credit schemes to small-holder farmers

so that they can afford to purchase agricultural inputs and improve efficiency in

marketing agricultural produce. For that purpose, EEA will customize their loan product

program to meet the specific needs of agricultural small scale business. For instance, a

loan product with a grace period and weather insurance could be an appropriate option.

2.3. Clients Customer profile is based on survey results explored by Finscope, a comprehensive national household survey focused on the financial services needs and usage across the

entire South and Southern African population (Finscope, 2007). The TRIODOS Bank highlighted following characteristics of the potential microfinance clients:

Population 57% of the adult population is less than 34 years, and mainly rural-based (72%). In

addition, there are approximately 14 Million people under 16 years.

Financial access A large segment (54% overall; 45% of urban, 57% of rural) of the adult population has no

access at all to financial services, either formal or informal (overall, 9% have a formal

bank account (11% men, 5% women, 16% urban, 4% rural), 2% have access to semi-

formal finance [NGOs, Saving And Credit Co-Operative Societies SACCOs] and 35% have access to informal finance like ROSCAs/ASCAs and moneylenders these

categories are mutually exclusive). Only 20% of the population has access to formal bank

in a 1 hour walking distance.

Financial literacy This is generally low, and lower still for women and for people living in rural areas (92%

of the population has heard of loans, but 84% do not understand how interest rates work,

or collateral, guarantors, opening an account etc.; 27% have never heard of a savings

account). Beyond loans and savings, financial literacy is close to nil (e.g. on insurance,

Automatic Teller Machines). Nevertheless, 82% of the total population indicated that they

would like to know how to open an account in a financial institution. This indicates a

huge need for more as well as better communication regarding financial services with the

larger population.

Sources of income Only 4% of the population is employed in the formal sector. Most people make a living

from agriculture, either by selling food crops (36%), cash crops (12%), cattle/livestock

produce (9%), or livestock (11%). Others run an informal small business (28%), not

(directly) related to agriculture. A large majority of people (61%) go without cash income

at times. Many (28%) depend on getting money from family and friends.

Use of credit and loan facilities Of those that borrow, most (38%) turn to family and friends. An additional 33% get loans

from kiosks, 23% borrow in-kind (e.g. livestock). Only 4% said that they have a loan

from a bank (5% of men, 1% of women). SACCOs and MFIs (Microfinance Institutions)

serve only a small percentage of all borrowers (9% and 6% respectively).

Use of savings facilities Most people with money do not save it with a bank or financial institution. Of those who

save, four out of ten favor saving in-kind (even more so in rural areas) and three out of

ten say they keep money in a secret hiding place (similar for urban and rural). Another

interesting aspect is that of the people with a bank account (9%), many save with or

borrow from informal providers (48%), SACCOs (26%) or MFIs (15%) (Regarding

money lenders and market risk section 5.1 Competitor).

3. BUSINESS ENVIRONMENT ANALYSIS

The context in which EEA operates was explored by an environmental analysis that

gauges how foreseeable external challenges will affect their capacity to achieve their

3.1. Competitors

The deregulation of the financial sector (in 1991) resulted in the privatization of the

National Bank of Commerce (NBC) and the Cooperative and Rural Development Bank

(CRDB), which were the dominant providers of rural finance. These institutions

decreased their participation in rural finance (Khijjah, 2004; Semboja, 2004;

Reweyemamu, et al., 2003). Several private banks were established but the majority of

them operate only in urban areas. In 2006, only 5% of the rural population had access to

bank services (Finscope, 2007). Although National Microfinance Bank aims to offer

micro-credits to micro-clients, from the month of January 2004, it allocated only 0.2 % of

loans to small scale farmers.

Access to credit seems to be a problem that equally affects rural farmers in all regions of

Tanzania. As indicated by Sarris et al. (2006), in 2004 more than 80% of the rural

households faced difficulties in accessing seasonal credits for purchasing agricultural

The extension of institutional finance to rural areas has been included among

developmental initiatives taken by the government and the development agencies to

eradicate poverty. Since the deregulation of the financial sector and the enactment of the

Cooperatives Act of 1991, there has been an increasing number of MFIs. In 2005, there were about 1,899 MFIs. Although, SACCOs are the dominant MFIs, and as 69 % of them

are from rural areas, only 2 % of the rural population has access to their services. The

limited capacities of MFIs are among the reasons why they have not managed to solve the problem of credit inaccessibility in rural areas (Randhawa and Gallardo, 2003). The

majority of the rural population still depends on informal sources of financial services

(Finscope, 2007), which are sometimes not reliable enough to make a significant impact

on income improvement and asset accumulation.

A summary of all relevant MFIs in Tanzania was provided by PRIDE Tanzania (PRIDE,

2007). Hereafter, besides PRIDE, the most influential NGOs are FINCA (Tanzania),

Small Enterprise Development Agency (SEDA) and Presidential Trust for Self-Reliance

(PTF). Smaller NGOs are YOSEFO, SELFINA, Small Industries Development

Organization (SIDO), Poverty Africa, Tanzania Gatsby Trust, the Zanzibar based Women

Development Trust Fund and Mfuko. Some minor institutions known as community

based organizations (CBOs) are dealing throughout the country. The following Banks are

providing financial solutions to the poor: Tanzania Postal Bank, CRDB Bank, the

National Microfinance Bank (NMB), Akiba Commercial Bank (ACB) and a few

Community/regional banks (namely Mwanga Community Bank, Dar-Es-Salaam

Community Bank, Mufindi Community bank, Kilimanjaro Cooperative Bank, Mbinga

Community Bank and Kagera Cooperative Bank).

The indicated total estimated demand for microloans is about eight million. Commercial

banks and Community banks together share 50,000 customers, while NGOs account for

220,000 customers. The rest are served by SACCOs, and many much more minor social

organizations with limited resources for their microfinance activities. The largest single

player in the NGO category with a market share of 29% is PRIDE, which is mainly due to

commercial and trade customers as classified by Abiah Kaaya, Director of SELF (Small

Entrepreneurs Loan Facility), a government microfinance wholesale fund. This

information is supported by the Bank of Tanzanias records (BOT, 2007).

There are about 1,600 mainly rural based SACCOs in the whole country serving an

estimated client population of about 130,000, most of whom are savers. According to

PRIDE, it is important to note that cooperative institutions in Tanzania have had a very bad history as most were associated with financial mismanagement to the extent that they

lost peoples trust and confidence. The cooperative based financial institutions therefore, could not make any meaningful impact in the lives of their members as they operated at

very small scales due to funding constraints. Some improvements have occurred since the government has been implementing a special program to resuscitate the cooperative based financial institutions (PRIDE, 2007). It takes time, however, before significant impacts are shown.

Other suspicious providers of financial solutions to the poor are moneylenders. According

to the Finscope study, 35% of the Tanzanian adult population has access only to informal

financial services. Some studies have emphasized the need to consider the use and the

amount of credit offered to the clients when evaluating the impact of the MFIs on poverty

reduction. It was found that the higher the amount of a loan or the frequency of

borrowing, the higher the labor productivity (Hossain and Diaz, 1999) and the household

welfare of the recipients. However, the amount of credit, which for the case of the MFIs

increases with the frequency of borrowing, may not necessarily lead to poverty reduction.

This is so because some poor borrowers continue borrowing from MFIs to repay loans

from moneylenders, and hence are trapped into the debt vicious cycle (Chavan and Ramakumar, 2002). This is an indication of increased vulnerability and poverty.

Microfinance Institutions in Tanzania with a special focus on Dar-Es-Salaam and

Morogoro Regions (BOT, 2005)

Bank NGO Financial Service

Association

SACCOs Community Based

Tanzania Mainland 8 53 1 105 1601 45 1813

Zanzibar 0 4 0 0 82 86

Total 8 57 1 105 1683 45 1899

Dar-Es-Salaam/ Ilala

(Gongolamboto)

4 4 1 60 0 69

Morogoro/ Mvomero

0 0 0 1 10 0 11

Average per Region in

Tanzania Mainland

2,65 5,25 80,0 2,25 90,65

3.2.Opportunities and Threats

Gongolamboto (Dar-Es-Salaam Region/ Ilala District).

The Ilala District has fewer MFIs than the average number per region in Tanzania

Mainland. The designated target areas around Gongolamboto are remarkable underserved.

In total, there are 17 MFIs in the district serving 144,153 clients (BOT, 2007). The total

demand of the adult populations who have no access to financial services is 720,000 (that

is 45 % out of the region adult population of 1.6 Million people, according to the

Finscope study).

There are 94,000 people living in Gongolamboto, and the other three target areas. Of that,

28,000 of the adult population do not have any access to financial services (4,500 in

Gongolamboto, 6,900 in Chanika, 1,600 in Kinyerezi and 15,000 in Kivukoni). The

remaining 38,000 people who have access to a financial institution are served by 15

SACCOs and one NGO, as well as the National Microfinance Bank (one of few

commercial Banks who are involved in the microfinance business) putting together a

market share of about 10%. The NMB has a market share of 39 %, mainly in the

populated Kivokuni, where they have a large branch.

Based on these facts, the estimated demand of micro-entrepreneurs who are currently out

of the scope of reliable financial institutions is at least 10,000. They represent the most

vulnerable and poor people in the target areas that will, prospectively, not be served by

NBM because of missing collaterals. Initially using the Grameen Bank model of

microfinance, EEAs strengths are serving the most vulnerable and poor people who will

not served by financial institutions.

Dakawa (Morogoro Region/Mvomero District)

Apart from being excluded from the formal financial sector, Morogoro has fewer MFIs

than the average number per region in Tanzania Mainland. Mvomero District with their

280,000 residents hosted only one SACCO who serves 260 people within the whole

district (Morogoro, 2007). The adult population of Dakawa, which is situated in

Mvomero, is about 4.600 people and they are totally underserved by financial institutions.

SACCOs supplement their share of capital by borrowing from the formal financial sector.

The limited number of commercial banks in Morogoro/Mvomero might result in a limited

amount of money available to lend to SACCOs members in this district. To avoid these struggles, EEA needs sufficient capital to extend their business to Dakawa. That might be

possible in the year 2013 at the earliest. The main issues serving financial demand in the

rural areas are poor infrastructure and low population density. Dakawa is located along

the Morogoro - Dodoma highway. Market access for small scale farmers and small

traders is given in both direction, Dodoma and Morogoro Municipality. The branch will

be open in Morogoro Municipality which is a 45 minute drive to Dakawa. Located in the

regional capital, EEA will be able to replicate their lending program to other rural areas.

Out of the 4,600 people, who have no access to financial institutions, the demand for

microcredit is estimated at 1,200 micro-entrepreneurs. EEA expects to lend to more than

80 % of these smallholders within two years, from 2013 to 2014. After that, EEA intends

to replicate their program to other wards in Mvomero District.

4. CORRABORATION AND PARTNERSHIP

4.1. Global Network

Global Advisory Boards (GAB)

Shaping a vision is an ongoing effort, necessitating the oversight of the EEA Global

Advisory Board. In his role as the chair of the EEA Global Advisory Board, Jerry

Twombly works in collaboration with co-chairpersons in each individual country who

coordinate the linkage of EEA with individuals, organizations, businesses, and institutions

in their respective countries, currently the USA, Germany, and Spain (see the list of

Global Advisory Board in the Appendix).

4.2. Cooperating Partnerships EEA relies on a wide-ranging web of partners across the globe that are committed to a

common purpose and are willing to invest resources - money, time and talents - to ensure

its success.

Tanzanian Government

Locally and country-wide, EEA is joining the efforts of the Tanzanian local and central

government, especially with the department of Poverty Eradication and Economic

Growth, to serve grassroots people specifically, by helping to implement the policies so

that we serve the interests of the citizens, the less advantaged groups, and underserved

areas according to government vision.

Bank of Tanzania

The Bank of Tanzania is the implementing agency responsible for coordinating and

monitoring the flow of funds on behalf of EEA donors. The Tanzania Investment Center

and other relevant government ministries will ensure that the people of Tanzania are

served according to the vision and agenda of the Tanzanian government.

Grameen Bank

Grameen Bank, based in Bangladesh, has great interest in collaborating with EEA to

replicate its micro lending model in Tanzania. Grameen Bank is the premier international

banking model for the poor, with more than 7.5 million borrowers in 65 countries around

the globe, mostly in the developing world. Grameen Bank will offer consultancy during

the development, implementation, and monitoring of a micro credit program in Tanzania,

and providing direct or indirect technical support during the pilot phase of EEA micro

credit programming.

GEXSI LLP is a consultancy firm in London and Berlin that provides professional

development investment services. Their aim is to mediate social investments in low-

income regions around the world, with a goal of the alleviation of poverty.

Genisis Institute

Genisis Institute is a leading European social business agency in Berlin that works as a

think tank, providing social solutions within an economic and business framework.

In the effort to avoid duplication of services, and to acknowledge the need for a multi-

dimensioned approach to achieve success, EEA continues to build relationships with

existing national and international organizations and bi-lateral development donors. Also,

financial institutions in the country, specifically the Tanzania Investment Bank, and Self

Project, National Economic Empowerment Council etc. have shown great interest in

EEAs programming.

4.3. Regulatory Policies The following regulatory policies play an important part in shaping EEAs institutional environment:

National Policies The National Microfinance Policy (NMP), enacted by the government in May 2000 and

incorporated in the Banking and Financial Institutions Act 2006, aims to enable the

increasing microfinance industry to become more sustainable and reliable. With this

policy, the government was relieved of its responsibility as the key player in delivering

financial solutions to the poor. Since then the formal private sector has been the main

provider of microfinance services. Those are required to apply these financial principles

in running their business. Beside to the NMP following other policies are in place:

The National Strategy for Growth and Reduction of Poverty (known as MKUKUTA). These strategies are executed by the department of Poverty

Reduction and Economic Growth. Their targets are as followed:

o Increasing economic growth o Reduction of income poverty o Improving the quality of life o Social well-being o Strengthening governance and accountability

Small and Medium Enterprises Development Policy, Ministry of Industry and Trade (2002)

National Land Policy (1995)

Legal Framework

A distinguished licensing system is in place to regulate financial institutions based on

minimum capital requirements:

Minimum Capital Requirements2

Financial Institution In Tsh In USD

Commercial Bank 5 Billion 3.743.916

Regional Unit Commercial Bank 200 50 Million 149.756 37.439

Non-Bank Financial Institution 100 50 Million 74.878 37.439

Micro Finance Company 800 Million (national) 599.026

2 Remark: Until end of 2007, no microfinance company had yet been licensed. The NGOs PRIDE and

FINCA are currently in a transformation process that will be finalized probably by the end of 2009.

200 Million (1 branch) 149.756

Financial Cooperative 800 Million in savings and

In addition, following regulatory and supervisory frameworks are established in which

EAA will adhere to:

The Bank of Tanzania Act (2006)

The Banking and Financial Institutions Act (2006)

The Companies Ordinance (1993)

The Microfinance Companies and Microcredit Activities Regulations (2005), that regulate microfinance activities under the supervision of the Bank of Tanzania,

with special respect to financial reporting, product design, risk management,

controlling, pricing, etc.

Capital Adequacy Regulations (2001)

Banking and Financial Institutions Regulations (1997)

Regulations for: liquidity management, risk management, internal control and audit

4.4. Transformation into a Microfinance Company (MFC) The institution is considering formalization when it passes the capital requirement from

BOT. The board evaluates the opportunities and risks associate with the different options

available. In the hope of attracting a significant flow of client savings and domestic and

international debt and equity funds, EEA is considering changing their legal status to that

of a formally licensed financial intermediary in year 2012, initially with one branch and

progressing to two in the future.

The Financial Committee (see section 5.4), which works under the governing board,

evaluates the costs that are likely to result in the context of banking regulatory structure.

The Financial Committee will incur both up-front and ongoing costs, and these costs are

likely to be substantial. The evaluation will entail costly feasibility studies of the

alternatives and extensive consultations with lawyers and accountants. Registering as a

formal financial institution involves legal and filing fees. Once EEA attains a formal

status, the regulations governing the licensed financial intermediaries will lead to greater

professionalization, for example, through conformity to more rigorous standards of

provisioning and asset valuation. Regulations may also impose significant constraints,

restricting the hours and days of operation, requiring advance approval for opening new

branches, and setting requirements relating to the compensation, hiring, and termination

of employees. A microfinance institution that changes its status will generally face

significant additional supervisory requirements, such as an internal audit department and

expanded reporting. For that purpose, EEA is considering hiring an internal auditor and

an additional accountant in 2012.

Significant capital reserve requirements are necessary, for example, Tsh 200,000, in the

transformation year and Tsh 800,000 when EEA will open a second branch in Dakawa

under legal status. Most significantly, EEA operates as a tax exempt nongovernmental

organization but will lose that status and have to begin paying taxes on its earnings when

they become a formal limited institution.

5. INSTITUTIONAL ASSESSMENT EEA is still in a start up phase and has no historical data to be assessed. The following

institutional capacity model is carried out of the market study and the environmental

analysis. It is a five year projection plan, considering the EEA milestone transforming to a

microfinance company in 2012, to be allowed to collect savings for the purpose of

becoming self sustained at the end of the projected period.

5.1. Credit and Savings Program Defining EEAs Financial Products At the end of 2008, EEA started a pilot program and offered a single loan product,

Solidarity Small Business Loan, and had no voluntary savings products. The institution

required all borrowers to maintain monthly compulsory savings, which is treated as part

of the loan product. According to the pilot results, EEA intends to follow up with this

loan type but plans to introduce new loan product in year four when they extend their

business to Dakawa. The product should be customized based on the needs of agricultural

small scale businesses. Because of the late introduction and the very low financial impact,

it is not designed as an individual product in the existent business plan.

EEA intends to convert to a nonbank financial institution in year three, which will make it

eligible to collect savings deposits. Its management expects to offer two voluntary

savings products: a voluntary savings account, called Passbook Savings that replaces the current compulsory savings, and a range of term deposits to be modeled as a single

product called Fixed Deposits.

Setting EEAs Loan Amounts and Repayment Conditions At the beginning of 2010, EEA will offer a single loan product in Gongolamboto, Dar-Es-

Salaam Region, Ilala District. Clients are required to form groups of five, and each client

will receive a loan amount based on their need. In accordance to the Grameen Bank

model, EEA decided not to require group guarantee. That means that no group member

will cosign for the others. All loans require biweekly payments. EEA will not offer a

grace period on repayments. Contractual loan terms varied between 8 and 12 months, it is

projected that in general clients took an extra month to fully repay their loans.

Loan Cycle Average Amount

Amount year 2

Effective Term

First 200.000 300.000 9

Second 300.000 450.000 9

Third 450.000 600.000 11

Fourth 600.000 750.000 11

720.000 1.000.000 13

Average loan amounts are expected to increase annually by the rate of inflation. Initial

annual client retention rate is to be estimated at 80%, and will increase gradually up to

90% from year three to five.

Defining EEAs Compulsory Savings Requirements EEA require clients to save 20 % of their requested loan amount before disbursement.

The primarily purpose of compulsory savings is to cover any default risk. These savings

will be held at the Corporative Rural Development Bank (CRDB). Because of the fact

that EEA didnt pass the capital requirement of the Bank of Tanzania as of yet, the company is not legally allowed to hold savings deposits. When EEA converts to a

nonbank financial institution in the third year of its strategic plan, it intends to eliminate

the compulsory savings requirement. In month 25, EEA will replace compulsory savings

with their voluntary Passbook Savings product and their Fixed Deposits.

Setting EEAs Pricing Structure EEA charges 30% annual interest using flat balance calculations. EEA also charges an

upfront commission fee of 3% on all loans at the time of disbursement. All lending has

been transacted in local currency, with no indexing to external values. The management

decided to take a lower interest rate than the market average, which would attract more

customers at the beginning and is in accordance to the Poverty Reduction Strategy of the

Tanzanian government. If the profitability projections turn out to be unacceptable, it will

re-price the loan product again.

Setting the General Parameters for EEAs Compulsory Savings Products The compulsory savings pay the depositors interest at 12.5%. The clients do not have an

individual saving account. EEA collects the savings from their clients and deposits it as

accumulated amount on their business account at the CRDB Bank. EEA pays out the

interest (minus a commission of 2%) when the loan is fully repaid or in year three when

their clients open voluntary saving accounts. Access to the compulsory savings is blocked

while the client has an outstanding loan and can be seized by EEA if the client fails to

repay the loan. The funds are not otherwise available for EEAs use.

Defining EEAs Voluntary Savings Products

Starting in year three, EEA plans to begin offering two voluntary savings products.

Passbook Savings will pay interest ranging between 2% and 6%, depending on the

deposit amount, with an average rate expected to be at 4%. Fixed Deposits will pay

interest ranging between 7% and 10%, depending on the term, with the average rate

expected to be 8%. These prices are above the current market rates (BOT, 2007).

EEA decided that a specific percentage rate of any savings deposits be placed in short-

term reserve deposits, to handle ongoing depositors withdrawing, with the rest available

for on-lending at the institutions discretion. EEAs management expects to establish a reserve of 40% of Passbook Savings and 25 % of Fixed Deposits.

5.2. EEAs Marketing Channel EEAs Initial Balances EEA projects that it will have 200 active clients at the end of 2009, all with Solidarity

Small Business Loans. Referencing EEAs balance sheet, it is determined that EEA will have a gross outstanding balance for its single loan product of Tsh 40,000,000 at the

beginning of the five-year projection.

Projecting EEAs Active Loans EEAs market study showed that the institution has the potential to grow from 200 to 9,000 clients in the current market area Gongolamboto by the end of its five-year plan. In

addition, EEA intends to open a second branch office, in Dakawa, in January of 2013.

This branch is expected to expand to 1,000 clients by the end of 2014, bringing the total

number of clients to 10,000.

The projection models multiple branches using a consolidated approach. It had chosen to

project credit activity by the number of active clients rather than by the number of new

clients each month to calculate a reasonable cycle time for each segment.

EEAs Projected Number of Active Loans (2010 - 2014)

Branch Initial 2010 2011 2012 2013 2014

Gongolamboto 200 1.200 3.000 5000 7.000 9.000

Dakawa 0 700 1.000

Total 200 1.200 3.000 4.500 7.700 10.000

growth rate

16,1% 7,9% 4,3% 3,7% 2,2%

EEAs Projected Term Loan Portfolio

500.000.000

1.000.000.000

1.500.000.000

2.000.000.000

2.500.000.000

3.000.000.000

1 7 13 19 25 31 37 43 49 55 61

Portfolio by cycle (real)

First cycle Second cycle Third cycle Fourth cycle Fifth cycle Sixth and future

EEAs Projected Term Loan Income

100.000.000

120.000.000

140.000.000

1 7 13 19 25 31 37 43 49 55

Term Loan Credit Income (real)

Interest, init port Interest, rate change Interest, current rate Upfront Fee 1

Upfront Fee 2 Ongoing Fee Indexing

Analyzing EEAs Customer Retention Rates Confident that the Grameen Bank model and the special trained staff will address their

clients needs, EEAs management expects a relatively high customer retention rate from 80% up to 90%. The management reviewed their loan-demand projections. They saw that

EEA will need to attract about 12,290 new clients in the next five years to reach its

expansion targets, and that only 2,290 of these clients will drop out during the five years.

Therefore, high client retention will need to be a primary goal in the coming years.

Projecting EEAs Compulsory and Voluntary Savings At the end of 2009, EEAs borrowers would have Tsh 8,000,000 of compulsory savings on deposit at CRDB - an amount projected to grow to Tsh 225,120,000 by the end of year

two. When EEA begins offering voluntary savings in their branch in Gongolamboto in

the first quarter of year three (after terminating the compulsory savings requirement in

month 37), management estimates that 60% of borrowers will transfer a significant

portion of their compulsory savings to the new voluntary savings accounts, either to a

passbook or to a deposit saving account. For the passbook saving account, management

estimates an initial average balance of Tsh 40,000,000 that will grow to about Tsh

221,000 at the end of year five. The same applies to the Term Deposit. The initial average

balance is estimated significantly higher and accounts for Tsh 300,000 increasing to Tsh

467,000 at the end of year five. The number of savers is predicted to be significantly

lower. This is because of the fact that customers take time to save sufficient capital

reaching the minimum deposit requirements of a Fixed Deposit account. In addition, the

savers will have limited access to their capital for an agreed time period.

As client confidence and awareness increase, the percentage of borrowers with voluntary

savings is projected to increase up to 80% in year five. In addition, EEA expects non-

borrowers to open Passbook Savings and Term Deposits accounts, starting in year three

as well. For Passbook Savings, EEA estimates 100 new accounts a month during the first

half of year three and then a 5% monthly increase in accounts from the beginning of the

second half of the year until the end of the five year plan. For Term Deposits, the initial

number of savers is estimated at 10% of the borrowers in year three, increasing slightly

with 1% in year four and 2% in year five.

EEAs Projected Voluntary Savings (by amount of Deposits)

200.000.000

400.000.000

600.000.000

800.000.000

1.200.000.000

1.400.000.000

1.600.000.000

1.800.000.000

Amount of Deposits, by product (real)ALL Savings Products

Passbook Savings Fixed Deposits Compulsory Savings

5.3. Board and Management EEA embraces the organizational leadership model with a leadership team capable of

formulating and shaping a coherent vision combined with a management team skilled in

implementing and rejuvenating the vision over time. This team is comprised of an

Executive Director working closely with Governing Board chair, Advisory Board chairs,

advisors and members committed to constructing and executing the strategies. The

Managers are responsible for the implementation and management of the vision,

specifically in the areas of microfinance, education, social business, research, and

entrepreneurial education. The management of the corporation is vested in the Governing

Governing Board

Board members are nominated and appointed for staggered terms of three years. Board

members serve a maximum of three successive terms; initial terms would be for three,

six, on nine years. A full board meeting would occur annually in the month of April

supplemented by quarterly conference call meetings. Every third year the annual board

meeting take place in Tanzania. The board members represent groups deemed critical to

managing a microfinance organization, banking, legal, accounting, education, pastoral, business, organizational development, government, financial planning, and women are

well represented in the board. Three members come from Tanzania, in which one of them

represents MFI clients of the EEA. The Board delegates responsibilities for day-to-day

operations to the corporations Executive Director and Committees. The board receives no compensation other than reasonable expenses.

Dr. Jasson Kalugendo is the Founder and Executive Director of EEA. Born and raised in

Tanzania, he has worked internationally in Rwanda, Kenya, Tanzania, and the United

States. Most recently, Dr. Kalugendo formed and operated All Nations Ministry, a

program serving the spiritual, economic and social needs of a culturally, racially, and

economically diverse community, particularly children, teens, single moms, and victims

of crime living in Antioch, Tennessee. At the same time, Dr. Kalugendo served as parish

pastor for the Lutheran Church where he also managed the church bookshop and acted as

communications director, newsletter editor, strategic planner, and leadership trainer.

Dr. Kalugendo obtained his Doctoral Philosophy degree from Concordia Theological

Seminary, Indiana, USA where he devoted much of his time to studying the sociological

patterns of bonding and bridging social capital. He holds two degrees in public relations

and social communication from Daystar University, Nairobi, Kenya, also taking classes in

social work. Dr. Kalugendo has participated in strategic planning, leadership

development, and organizational management seminars.

Jerry Twombly is the Co-founder and President of EEA. He became intrigued with

national development practices in 1970 while working as a professor at Word of Life

Bible Institute at Schroon Lake, NY. In addition to his teaching experience, Jerry

Twombly has worked in public relations, student recruitment, and fund-raising. In 1973,

he returned to Grace Theological Seminary to pursue post-graduate studies where he

assumed a position in the development office in exchange for a salary and free tuition.

During nearly 40 years of working with Christian ministries and organizations in all 50

states of America, five of nine Canadian provinces, and several countries around the

world, Jerry Twombly assisted 3,500 clients to raise over USD 2 billion for programs and

Dirk Sander is a Social Business and Microfinance Consultant trained and examined by

Grameen Trust in Bangladesh. He has worked for 17 years in varied executive functions

for Citibank Germany. His most recent positions include a Credit and Risk Manager and a

Branch Manager. Dirk Sander coordinates EEAs German Advisory Board.

Vicente a Jose Boixareau coordinates the vision of EEA in Spain. Mr. Boixareau has a

MBA degree from CUNEF & Universidad Complutense, Madrid and is currently

pursuing a PhD in economics and finances. He is a researcher and lecturer on economics

at the CIIF International Centre for Financial Research and Finance Department, IESE

Business School Spain in Madrid, and has been a researcher with the Departments of

Finance in Germany, France, and Bangladesh.

National Advisory Board Tanzania

A National Advisory Board (NAB) in Tanzania provides oversight to local EEA

operations. The chairperson, Elias Mashasi, was an Executive Director with parastatal

organizations in Tanzania for 20 years and spent the last 10 years working with

International Labor Organization.

5.4. Roles and Responsibilities of the Board Management The Board may create committees as needed, such as community Relations, Cultural

Outreach, Research and Publication. There are two outstanding Committees: Executive

and Finance Committee. The Governing Board appoints all Committee chairs who must

be members of the Board.

The Executive Committee

The Executive Committee reviews the performance of the Executive Director. Except for

the power to amend the Articles of Incorporation and Bylaws, the Executive Committee

have all power and authority of the Governing Board in the intervals between meetings of

the Board of Directors, subject to the directors and control of the Board of Directors. The

Executive Director is responsible for hiring and supervising. The Executive Committee

shall serve as a vital committee and is responsible for developing a personnel policy.

Finance Committee

The Treasurer is chair of Finance Committee, which include three other Board members.

The Finance Committee is responsible for fiscal control, development and reviewing

expenditure procedures, and a fundraising action plan and organization annual budget.

The Board of Directors must approve the budget and all expenditures must be within the

budget. Any major change in the budget must be approved by the Board of Directors or

Executive Committee. The fiscal year shall be the Calendar year. Quarterly reports are

required to be submitted to the Governing Board showing income, expenditure and

pending income. The financial records of the Corporation are public information and shall

be made available to the Governing Board members and the public.

5.5. Institutional Resources and Capacity Defining EEAs Staffing Categories EEA refers to members of its field staff as Loan Officers. The company opted for salary and benefit adjustments at the beginning of each fiscal year, because EEA's board

generally grants an increase equal to the inflation rate. In addition to its loan officers,

EEA considers its Credit Supervisor, Bookkeeper and Operations Manager part of the Branch-related staffing. All other existing staff are considered Head Office staff. In

January 2013, when another branch office is to be opened, EEA will shift the operations

manager to the position of branch manager of the old branch and hire a branch manager

for the new one. So the job title includes both positions - "Operations/Branch Manager".

Also, a bookkeeper will work in the new branch. Starting in year three, when savings

products are introduced in Gongolamboto, that branch will add the following positions:

Teller and Security Guard. One year later, when a new branch is opened in Dakawa, additional Tellers and Security Guards will be hired. The credit supervisor will also be

hired in year four, when the second branch is to be opened. His role is to empower the

sales staff and to review the credit decisions. A large branch like Gongolamboto that will

need more than 40 employees should be supported by additional supervision functions.

For administrative-level staffing, EEA entered the following positions: Executive Director, General Manager, Chief Accountant, Assistant Accountant, MIS Supervisor, Internal Auditor, Human Resource Manager, Saving Director, Secretary, and Driver. (For detailed job specifications see attachment).

Defining EEAs Operational Expense Categories For Branch-related operational expense categories, the staff specifies Rent, Utilities, Transportation, General Office Expenses, Staff Training, Borrower Training, and Repairs, Maintenance and Insurance. For Head Office operational expense categories they enter Rent, Utilities,Transportation, General Office Expenses, Repairs, Maintenance, and Insurance, Professional Fees and Consultants, Board Expenses, and Staff Training.

Projecting EEAs Branch Resources and Capacity Projecting EEA's Branch-related Loan Loss Provisioning

EEA estimates that its portfolio, at risk for more than 30 days, will be 10%. It projects

write-offs of 2.2% of its portfolio and decided to use this write-off rate for all future

projections. The loan loss reserve, as of December 2009 on the balance sheet, is to be

estimated by Tsh 1,200,000.

Defining EEAs Branches EEA plans to open its first branch in Gongolamboto in third quarter of 2009, and

indicates that a second branch will open in the beginning of year four in Dakawa.

Setting the Links for EEAs Loan Officer Projections EEA's lending methodology (Grameen Model) permits experienced field staff to work

with a caseload of 350 clients. Loan officers generally take 12 months to move up to the

senior level and a full caseload. Beginning staff generally work with 25% of a full

caseload, secondary staff with 50%, and intermediate staff with 75%. EEA generally hires

new loan officers in groups of at least three in order to coordinate staff orientation and

training. At the beginning, EEA will have two loan officers, one of whom will have been

with EEA for 12 months (i.e., senior level), and one which will be newly hired.

Projecting EEAs Automated Branch-related Staffing Levels At the beginning, EEA intends to start with two loan officers, one bookkeeper and one

operations manager. To ensure efficiency and to serve with a high grade of safety and

quality, the company planned to hire:

one credit supervisor for every 12 loan officers, starting after a total of 12 loan officers are hired;

one branch manager and one bookkeeper for each branch that opens;

one teller for every branch that offers voluntary savings;

one security guard for each branch that offers savings, starting in year three.

The cost for each position - including salaries, benefits and payroll taxes - as of January

2010 is estimated in the following table. The model will automatically increase the

salaries by the inflation rate in the first month of each fiscal year.

Staff Position Monthly Salary (Benefits are included) / Tsh

Loan Officer, Entry level 333.875

Loan Officer, Intermediate level 420.200

Loan Officer, Senior level 534.200

Teller 467.425

Bookkeeper 593.000

Operations/Branch Manager 801.300

Credit Supervisor 1.200.000

Security Guard 267.100

Projecting EEAs Branch-related Other Operational Expenses To generate projections of EEA's Branch-related other operational expenses, the company

distinguished the Branch-expenses from administrative-expenses categories opting for

automated projections as they enter the following Links:

Category Expense Amount/ Tsh Inflation

Rent 659.250 per branch per month Monthly

Utilities 263.700 per branch per month Monthly

Transportation 65.000 per officer per month Monthly

General office expenses 135.000 per branch employee per

Repairs, maintenance,

659.250 per branch per month Monthly

Staff Training 70.000 per branch employee per month Monthly

Borrower Training 1000 per borrower per month Monthly

Misc. expenses (% or

8% of total branch other operational

Entering Initial Balances for EEAs Branch-related Fixed Assets EEA entered initial balance information for the following Branch-related fixed assets, as

of the end of 2009:

Asset Purchase Amount Remaining Life

Two computers 1.000.000 1

Assorted office furniture 750.000 3

Three employee furniture groupings 200.000 4

One Photocopy 2.000.000 1,5

One Money Detector 300.000 2

Two Motorcycles 3.900.000 2

Planning EEAs Fixed Asset Acquisitions at the Branch Level EEA decided to link each fixed asset category to a key output of the model in order to

automatically generate its fixed asset acquisition schedule. They estimate that a branch

office needs one computer for every four Branch staff. EEA plans to purchase one set of

general office furniture for each branch office. They linked employee furniture groupings

to the number of Branch staff, using a ratio of one unit of furniture for each Branch staff

person. For other assets categories they specify an MIS system to be introduced in year three.

Projecting EEAs Administrative Staffing Levels At the beginning of 2010, EEA's administrative staff will consist of an executive director,

a chief accountant, a secretary and a driver. In addition, the institution plans to hire an

MIS manager at the beginning of year three to supervise the new management

information system, a savings director in the third quarter of year two to prepare for the

new services to be offered in year three, and a human resources manager at the beginning

of year two to work with the growing number of staff. Starting in the third quarter of year

two, when EEA prepares to transform to Microfinance Company, they will hire a general

manager that will take over the executive responsibility for the formal microfinance

institution, and an Assistant Accountant. When EEA becomes a legal Microfinance

Company in year three, they will hire an internal auditor to ensure appropriate controlling

and reporting.

Projecting EEAs Administrative Salary and Benefits Expenses Just as for the Branch staff, the salaries of EEA's administrative staff is considered equal

to market rates. The staff estimated monthly salary and benefit costs for administrative

staff are as follows:

Executive Director 3,872.950

General Manager 3.205,200

Chief Accountant 1,068,400

Internal Auditor 800,000

Assistant Accountant 667,750

MIS Supervisor 1,068,400

Human Resources Manager 1,068,400

Secretary 534,200

Saving Director 1,068,000

Driver 267,100

Projecting EEAs Other Operational Expenses at the Administrative Level EEA prepared the following budget estimates for other operational expenses at the

administrative level:

Rent (Head Quarter Office) Subsidized by other partners

Utilities Tsh 500.000 per month Monthly

Transportation Tsh 35.000 per administrative employee

General office expenses Tsh 135.000 per administrative

employee per month

Repairs, maintenance, insurance Tsh 131.850 per month Monthly

Professional fees, consultants Tsh 1.000.000 per month Annually

Board Expenses Tsh 540.000 per month Monthly

Staff Training Tsh 150.000 per administrative

Miscellaneous expenses (% or

5 % of total administrative other

operational expenses

Developing EEAs Fixed Asset Acquisition Plan at the Administrative Level To begin the fixed asset analysis at the administrative level, EEA entered the following

information about the institution's existing assets:

Asset Purchase Amount/ Tsh Remaining Life/ years

Two Computers 2,000,000 1.5

One Assorted office furniture 1,500,000 4

Accumulated depreciation, total (1,642,000)

EEA budget for the purchase of six additional computers in months 13, 19, 25, 31, 37 and

49, whenever EEA expect to hire new administrative staff members (e.g. Human

Resource Manager is expected to be hired in the beginning of year two). They also

budgeted for the purchase of additional office furniture grouping in month 19, when

administrative staff accounts for more than five members. These purchases are in addition

to the automatic replacement of fully depreciated equipment that is projected by the

Analyzing EEAs Land and Buildings In 2009, EEA owned no land or buildings and had no plans to acquire any during the next

five years.

Analyzing EEAs Other Assets EEA's strategic plan identified an urgent need to upgrade the MIS system, and budgeted

Tsh 70,000,000 in month 13. The MIS is treated as an asset and amortized over a five-

year period.

Analyzing EEAs In-kind Subsidies Through partnership with other stakeholders, EEA receives free rent for their Head

Quarter office during the projected period. EEA estimates the value of this support at Tsh

8,016,000 for year one. With regards to the inflation, they project it will increase to Tsh

10,625,625 in year five. EEA entered these figures initially as their monthly equivalents

of Tsh 668,000 a month for year one. While this rent subvention is not an actual expense

for EEA, it is factored into the financial profitability calculations.

EEAs Projected Expenses

Expenses (real)

Br.Staff Other Br. Exp H.O. Exp. Depreciation Loan Loss Cost Funds Adjustments

EEAs Projected Total Income and Expenses

160.000.000

Income and Expenses (real)

Total Income Expenses

5.6. Risk Management and Controlling EEA identified following main risk categories: credit, liquidity, and operational Risks.

Credit Risk

Credit risk is defined as a potential loss that is indicated when a borrower fails to repay a

loan. EEAs risk prevention and collection strategy depend on the reason for the imminent default: unwillingness or financial distress. Group lending methodology

up-front compulsory savings will decline EEAs credit risk. Biweekly collection procedures and trainings are parts of an early risk recognition system based on ongoing

customer evaluation provided by the loan officers. Different approval levels (group

member loan officer branch manager credit supervisor) should ensure a high quality loan application process. A borrower who is in financial distress and is willing to repay

their loans will be transferred to a flexible loan. A flexible loan reduces the installment

size and extends the maturity depending on the customer payment ability. In 2012, when

EEA will be legalized as Microfinance Company, an internal auditor will be hired to

implement a risk management system following the Basel II requirements and the

national banking regulators.

Liquidity Risk Liquidity risk management will be done by the Finance Committee which ensures that

funding commitments and deposits withdrawal can be met on time. For that purpose,

EEA has considered a sufficient liquidity margin in their model (section 5.7 Financing

3 Group lending approach provides moral support and social network but not a financial support to an

individual member.

Operational Risk

Operational risk is a main issue for a start up in finance with their limited resources.

Employees who are overloaded, undertrained or underpaid are the primary driving force

behind errors, fraud and mismanagement. EEA decided to serve and educate their

employees from the beginning in a competitive manner. This serves to increase their

identification with the company. To ensure proper operational procedures, reasonable

controlling systems will be developed from the beginning and will be managed by the

Executive Committee. An operational margin is implemented in the model to handle any

operational losses and liquidity gaps (see section 5.7 Financing Strategy).

5.7. Financing Strategy Identifying EEAs Sources of Financing Management prepared the following summary of EEA's financing sources. EEA has the

following grant commitments and pledges:

World Vision has pledged Tsh 3,300,000 unrestricted.

Better Place. The internet grant collection platform has provided Tsh 691,000, unrestricted.

Individual Investors. They have pledged Tsh 13,350,000.

EEA also has initiated discussions to commitments for grants from the following

organizations:

GLS Treuhand (Foundation). GLS Treuhand is a foundation of a German Social Bank who promotes small projects in poverty eradication activities worldwide.

The foundation managed a small grant portfolio of three million US dollars. EEA

estimates a grant commitment of about Tsh 75,000,000, starting in month seven,

2010, restricted for initially operational costs.

SELF (Small Entrepreneurs Loan Facility). SELF is a Tanzanian wholesale fund and has additional grant funds available to subsidize microfinance institutions

technology and equipment. It normally provides small grants subjected to office

equipment. EEA estimates an initially grant of Tsh 13,350,000, restricted for other

GTZ (Society of Technical Cooperation). The German GTZ is an international cooperation enterprise for sustainable development with worldwide operations.

GTZ promotes complex reforms and change processes, often working under

difficult conditions. Its corporate objective is to improve peoples living conditions on a sustainable basis. EEA expect a grant of Tsh 70,000,000 to

purchase and introduce a MIS System at the beginning of year two.

EEA needs to receive portfolio restricted loans, and estimates for the third quarter in 2009

a initial loan of about Tsh 40,000,000 at zero percent to expand their pilot program to 200

borrowers in Gongolamboto. It is reflected at the initial outstanding amount, at the

beginning of the projection period.

EEA restricted the use of savings to loan portfolio financing. The management

established a liquidity margin for portfolio of 25% of monthly loan disbursements, and a

liquidity margin for operations of 33% of monthly cash expenses. EEA is expecting an

initial market rate cost of funds of 20%. This is a precaution estimate. Some commercial

Banks in Tanzania offers lower interest rates. This rate is expected to decrease down to

16% when the company becomes a formal financial institution and has sufficient means

in year three. EEA considers any interest rate that is at least 85% of this value to be

market rate.

Projecting EEAs Financing Flows Loans

EEA modeled the institution's financing strategy by entering all confirmed and likely

financing receipts and repayments. All loan payments are entered as negative numbers:

Unidentified sources. The initial loan amount of Tsh 40,000,000 that is need to serve 200 clients in third quarter 2009 will be repaid in October 2010. A new fund

of Tsh 150,000,000 with a supposed maturity of two years is expected in January

2011 and entered in the model. EEA will make monthly payments.

Oikocredit. EEA is scheduled to receive its first disbursement of Tsh 200,000,000 in January, 2011 with a supposed maturity of three years. EEA will make monthly

payments. No new funds are expected.

Vision Microfinance Fund. EEA has started the discussion with Leopold Seiler, Portfolio manager, and expects a fund of 100,000,000 in January 2011, with a

supposed maturity of two years. EEA will make monthly payments. No new funds

are expected.

SELF. EEA would negotiate a onetime disbursement of Tsh 50,000,000 with a supposed maturity of two years in January, 2011. EEA will make monthly

EEA anticipates experiencing a funding shortfall in the beginning of 2010. The following

years also show shortfalls, with the exception of year five. In addition to the indicated

fund sources, EEA is forced to request unrestricted grants for:

Year one: Tsh 280,000,000 Year two: Tsh 190,000,000 Year three: Tsh 180,000,000 Year four: Tsh 200,000,000

EEA management philosophy is to gain self sufficiency within five years. For that

purpose, the management restricts the fundraising portion with a declining percentage of

100% in year one down to 55%, in year two, 50% in year three and 30% in year four. In

2014, EEA does not expect to require any more grants.

In year four, EEA plans to open a new branch in Dakawa. Under the National

Microfinance Policy, EEA is requested to raise capital amounting to Tsh 800,000,000 to

become a nationwide operating Microfinance Company. To increase their equity and to

strengthen their customer retention, EEA will introduce a compulsory membership model,

where each new borrower will pay Tsh 13,255 with an annual distribution of dividends,

starting in year three. Projection shows that additional equity funding sources are needed.

The following equity funds and banks meet the EEA principles and would be appropriate

shareholders:

Dexia Micro-Credit Fund (DMCF). A commercial investment fund with a special respect to social impacts. Focus on

micro-entrepreneurs in emerging markets.

Vision Microfinance Fund. A fund with a double bottom line strategy, to maximize the risk return profile for

the benefit of the investor and to strengthen the social impacts for micro, small

and medium enterprises in emerging and least developed economies.

Impulse Microfinance Investment (IMI). Similar to VMF, IMI manages their portfolios with a bottom line strategy. It

invests in financial markets in developing countries and channels private

investment funds to the microfinance industry.

PAX Bank. A German church bank with high amount of interest to develop the microfinance

National Economic Empowerment Council (NEEC)

EEA expects to gain from each investor Tsh 70,000,000 in year three. After increasing

EEAs capital, the revised graphs below show that EEA will achieve full financial sustainability from month 43, ending by year five at 143% in operational, and 131% in

financing sufficiency.

EEAs Projected Sustainability

Operational and Financial Sustainability

Oper. Sust. Fin. Sust.

Investment Strategy

EEA will not establish any long-term investments during the first five years. EEA will

earn 3% interest on cash deposits. It earns 5% on short-term investments, 12.5% on

savings reserves and would earn 12.5% on long-term investments if it had any. All rates

are based on current market rates. EEA will generate nearly Tsh 173,000,000 (round up)

in investment income over the five-year period.

6. FINANCIAL PROJECTIONS

Financial projection plan was made with a Microsoft Excel spreadsheet developed by the Consultative Group to Assist the Poorest (CGAP) and Women's World Banking (WWB).

1. List of Global Advisory Board

U.S. Advisory Board

Initial US Advisory Board members, working under the chairmanship of Jerry

Twombly, include:

Pastor Mike Wekelund, New Life Lutheran Church, 15-years experience as Latin America missionary. He also runs his own business.

Reverend Randy Mutter, Pastor of Adams United Methodist Church, formerly a Construction Manager, CLK Multifamily Management

Dr. Harry Gates, chaplain coordinator at Skyline Medical Center, pastor to Nashville Cowboy Church and Ranch House, and Vanderbilt University MBA

graduate in Economics

Tom Bolt, Retired, former Financial Planner Ben Baggett, self-employed, Appraiser

German Advisory Board

Initial Germany Advisory Board members, working under the co-chairmanship of Dirk

Sander include:

Dr. Maritta Koch-Weser, former director of World bank, now CEO of Gexsi Dr. Sven Remer, Program Executive, Institute of Social Banking, GLS Treuhand Stephan Siegel, Risk & Scoring Manager for American Express, formerly Head of

Credit Scoring, Citibank Germany

Heike Uhl, International Auditor & Consultant: Fabel, Werner & Schnittke GmbH, started several projects in Africa, speaks Swahili

Nicola Tofaute, Start up Consultant for women and currently project leader literacy program for German Adult Education Association (DVV)

Dr. Denitsa Vigenina, Risk Manager for Citibank in several countries, Involved in a microfinancing in London, currently Manager of Business Strategies for SEB

Banking Group

Ulrich Merkes, a freelancer and a former manager of Deloitte, Currently works for Swisscontact

Shoe Sussan Katende, advocate at a Tanzanian law firm MLC, prior employee of United Nations High Commissioner for Refugees -Tanzania. UNHCR;

Deogratias Mutalemwa, Development Economist with extensive experience in government affairs, rural development, public policy, and development lending

operations, including nearly 20 years in the Ministry for Finance for the

Government of Tanzania, 10 years as director of International Cooperation and

Co-financing for the African Development Bank in Belgium, and, since retirement

in 1997, senior research fellow and coordinator for the Tanzania Participatory

Poverty Assessment;

Revelian Shemelelwa, Masters of Science in Agribusiness, consultant in microfinance and social business research, planning, marketing and management;

Paul Simon, CPA, deputy for the Treasury Department of an Evangelical Lutheran Church in the North Western Diocese of Tanzania.

2. Job Descriptions

3. Characteristics of the Target Audience

This project focuses on the poor, especially women. Why women? Women and children

are the most vulnerable. Furthermore, they often run the risk of attack and abuseone woman informed an EEA interviewer that she had been raped and humiliated when she

arrived at the dump before other women. Women will take any opportunity to help their

families survive even if it means being involved in activities that could potentially

humiliate them. Women often are left to reclaim discarded items in exchange for small

change. For example, the only recourse available to one poor women EEA interviewed,

was collecting plastic bottles at the dump, an area rampant with contagious disease. The

bottles were then sold for mere change. Even after spending the whole day collecting,

washing, and selling the bottles, the women earn less than $1 a day. Young girls work as

maids or are pressed into service as sex-workers, while boys are often involved in child

labor and petty criminal activity.

Designation Experience and skills

Minimum of 7 years working in community development, financial institutions,

organizational leadership and planning with at least Masters degree of higher

Microfinance

Minimum of 5 years working in community development, financial institutions,

Marketing with at least Masters level in social science, finance, or economics

Minimum of 5 years working Accounting field. CPA holder or its equivalent.

Minimum of 2 years experience working in accounting activities

Possess at least Advanced Diploma or Degree in Accountancy and Finance.

Minimum of 5 years experience working in Human Resources Activities.

Possess at least Postgraduate or Maters degree in Human resource and Public Administration.

Internal Auditor Minimum of 5 years experience working in audit departments in Financial

institutions. Possess at least advanced Diploma or Degree in Accounting &

Controlling

MIS Supervisor Minimum of 3 years experience working in IT Activities in Financial institutions.

Possess at least Diploma in Computer Science or Information Technology.

Minimum of 5 years experience working in operation/field Activities in

social/Financial institutions. Possess at least advanced Diploma or Degree in

Social Science/ Administration.

Credit/Loan

Possess at least advanced Diploma or Degree in Social

Science/Administration.Possess at least advanced Diploma or Degree in Social

Science and Accountancy

Drivers Form IV/VI certificate with Class C Driving Licence.

Security Guard

Form IV/VI certificate and attended military training

Secretary Must have a Diploma or Advanced Diploma in Secretary and Computer Studies

from a recognized institution.

Must have at least 2 years experience as secretary & Data Clerk

Must posses knowledge in computer a application such as Microsoft Excel, Microsoft Word, Microsoft Access, Microsoft Power Point.

The majority of women, unlike men, interviewed by EEA in Dar-es-Salaam discussed

how painful it is for them to send their children to school each day with only the meal in

their bellies and no shoes on their feet. The experience EEA obtain through the

community reveals that a men often hide money from their families for their own desires.

Even if his family might be struggling, a man may spend money in other areas that fulfills

his own desires, without considering familys needs. Therefore, women need to be empowered so that they can transform their families.

A second audience category is the poor (especially farmers and young people) who

cannot receive loans from other financial institutions or grantors - such as an employee.

These people live on less $1 a day. It is not necessarily that the poor do not want to do

something to improve their lives. Economic and cultural structures have caused them to

develop a mindset of EEA does not have a way out. Profit-motivated financial institutions are less inclined to help the poor because the poor lack collateral as well as

the experience of handling loans. Professor Muhammad Yunus, whose work focuses on

the poorest of the poor, argues back by saying that the poor pay back the loans. He has

found that the poor have their own plans, agendas, and business ideas, but they do not

have access to financial services.

The third group includes nursery, primary and secondary school teachers, nurses from

dispensaries, hospitals and other private sectors of employment as a means of boosting

self-employment among them. The goal is to encourage the passage of their newfound

education to the peop

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IMAGES

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  3. Financial Management For Microfinance Program Implementation

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  4. Le guide de la microfinance

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VIDEO

  1. A Business Plan

  2. Introduction to Business Finance

  3. How to download jazz cash statement

  4. Stakeholders Advocate Increased Funding For Micro-Finance Banks

COMMENTS

  1. Microfinance Business Plan (2024)

    This microfinance business plan template is about a sample microfinance bank that operates in the USA. It will provide an overview of a microfinance bank's business models, services, customer focus, management team, success factors, financial highlights, and plans. Refer to our financial advisor business plan for a detailed understanding.

  2. PDF Business Planning and Financial Modeling for Microfinance Institutions

    Chapter 9 Using Business Planning as an Ongoing Management Tool 151. 9.1 Variance analysis 151 9.2 Annual planning 152. Annexes. 1 Installing and Starting Microfin 153 2 Printouts from Microfin 157 3 Data Requirements for Completing Microfin 217 4 Program or Branch Modeling Exercise 221 5 Analysis of Effective Interest Rates and Costs to ...

  3. Microfinance Bank Business Plan [Sample Template]

    1. Industry Overview Microfinance banks provide microloans to individuals and small businesses. These individuals and small businesses tend to go for loans to be able to pay for the purchase of real estate and other transactions. This demand in turn makes the microfinance bank business a recession-proof business.

  4. PDF Business Plan to Start Up a Microfinance Institution in Tanzania

    The EEA intends to use Grameen Bank model, developed by Nobel Peace Award winner, Muhammad Yunus. EEA intends to reach out to 10,000 poor families in Tanzania with microloans in the next five years in Gongolamboto, Kinyerezi, Chanika and Kigamboni. Achieving this goal EEA will expand its business in 2013 to Dakawa, Morogoro Region.

  5. Business planning and financial modeling for microfinance institutions

    Business planning for microfinance institutions can be understood as two closely related processes: strategic planning and operational planning. Strategic planning .

  6. (PDF) Microfinance Bussiness Plan

    Giacomo Aghina, Idir Boundaoui This paper is a research on the development of the Islamic microfinance sector in three countries: Yemen, Egypt and Indonesia. The main purpose of this study is to find out which factors are essential for the expansion of the mentioned sector, and if they are comparable to other countries.

  7. PDF Business Planning for Microfinance Institutions

    The Pilot initiative had two complementary long-term objectives: 1) to improve the institutional viability of MFIs in Africa and 2) to enhance the human resource base in microfinance in Africa through sustainable training programs that would help develop stronger MFIs and increase the market for local training services.

  8. PDF Business Plan Guidelines for Microfinance Institutions

    Market opportunity. Summarize the opportunity that the MFI will exploit. Products and technology. Identify what gives the insti-tution a competitive advantage in the marketplace. Financial projections. Proposed financing. The Microfinance Industry, the Institution and its Products The industry. Current status and prospects.

  9. PDF The Microfinance Business Model

    1,335 microfinance institutions between 2005 and 2009, jointly serving 80.1 million borrowers, to calculate the costs of microfinance and other elements of the microfinance business model. It calculates that on average, subsidies amounted to $132 per borrower, but the distribution is highly skewed. The median microfinance institution used

  10. (PDF) THE COSMOPOLITAN MICROFINANCE BANK LIMITED Revised Business Plan

    The study aimed at finding out why there has been deviation by operators of this sector from the set objectives of CBN some of which are: to increase employment in the country, mobilize deposits of the poor, increase participation of the poor in socio-economic development.

  11. Business Planning for Microfinance Institutions

    January 2009. The 'Business Planning' course one of the four courses in the Operational Management Curriculum, along with 'Product Development', Information Systems' and 'Operational Risk Management'. The original five-day course guided participants through the process of strategic and operational planning and to develop the ...

  12. PDF Microfinance Policy and Strategy for the Bank Group

    (RMCs) in poverty alleviation. In line with this vision, one of the of the Bank's strategic priorities plan is improve the effectiveness of Bank activities and achieve productivity growth and poverty reduction in Africa. Microfinance plays a critical role in achieving the Millennium Development Goals

  13. PDF HANDBOOK ON MICROFINANCE INSTITUTIONS

    4 11 business correspondence model of microfinance 11.1 what is "business correspondence" model? 11.2 viablity of bc model 11.3 bc can become an effective tool for financial inclusion 11.4 the bc model has benefits for both the banks and the mfis 11.5 the benefits of the bc model for mfis are manifold 11.6 guidelines by the reserve bank of india

  14. A unique business model for microfinance institution: the case of

    2.2. Financial sustainability of MFIs. Examining the microfinance sector's financial capacity to survive on the market, i.e. its financial sustainability, reveals its success and development (Lensink, Citation 2018).Financial sustainability was defined by D'espallier (Citation 2013) as a firm's capacity to meet financial goals without external help.

  15. PDF Business Planning Guide for Microfinance Institutions in Uganda

    future Many mICrofinance mstItutIOns underestImate the role ofplannmg and howa good busmess plan can gmde an MFI m the nghtdIrectIOn, help It to ralse money, prepare for the future, and measure Its progress ThIS gmde IS mtended to prompt mIcrofinance mstItutIons to think about where they have been, where they wantto go, andhowthey Will get there

  16. PDF Microfinance Strategic Framework (2019-2023) (2019-2023)

    MFB Microfinance bank MFI Microfinance institution MIX Microfinance Information Exchange MOFP Ministry of Finance and Planning NFIS National Financial Inclusion Strategy ... We aim to do this by developing a new strategic plan, as well as a legal and regulatory framework to encourage the sector's growth and the diversification of the products

  17. PDF The Microfinance Business Model: Enduring Subsidy and Modest Profit

    The Microfinance Business Model: Enduring Subsidy and Modest Profit Robert Cull (World Bank) Asli Demirgüç-Kunt (World Bank) Jonathan Morduch (New York University) October 17, 2017 Abstract Recent evidence suggests only modest social and economic impacts of microfinance. Favorable cost-benefit ratios then depend on low costs.

  18. PDF Development Experience Clearinghouse (DEC)

    Development Experience Clearinghouse (DEC) - Home

  19. PDF MFI FINANCING STRATEGY GUIDELINES AND TEMPLATE

    MBB MicroBanking Bulletin MFI Microfinance Institution MIS Management Information System MIX Microfinance Information Exchange OSS Operational Self-Sufficiency TD Treasury Department

  20. PDF GCAF Strategic Plan 2019-2022 (A4)

    The Foundation's partners are mainly intermediate-sized tier 2 institutions (with a portfolio between USD 10 and USD 100 million), and small tier 3 institutions (with a portfolio of less than USD 10 million), which currently represent around 90% of the institutions financed by the Foundation. Under the Strategic plan 2019-2022, the Foundation ...

  21. Microfinance Bank Business Plan (Sample Template

    Microfinance Bank Business Plan [Sample Template… - Read online for free.

  22. (PDF) Download Microfinance Bank Business Plan in Nigeria

    (PDF) Download Microfinance Bank Business Plan in Nigeria | Nigerian Educational Consult - samphina.com.ng Microfinance Bank Business Plan in Nigeria Microfinance Bank Business and Financial Plan Our Microfinance Bank Business Plan in Nigeria is well documented and can also be used for, but not limited to: Grant Applications, Bank Loans,

  23. Example Business Plan for Microfinance

    1 Business plan Private and confidential FOR STARTING A MICROFINANCE INSTITUTION IN TANZANIA Dar-es-Salaam June 2009 2 Table of Contents 1. INTRODUCTION AND BACKGROUND ..................................................... 3 1.1. Executive Summary .......................................................................................... 3 1.2.