Welcome To The Nuts and Bolts of Microfinance

Welcome to the
Nuts and Bolts of Microfinance

Objectives
Course Objectives - Participant will be able to:
• Identify risks that senior and branch

management face in the day to day operations
of an MFI.
• Recognize planning needs and develop

appropriate plans for a given technical area
and/or risk
Objectives
Course Objectives - Participant will be able to:
• Understand key decisions points for a given

technical area and/or risk and use management
tools to mitigate risk and/or increase
efficiency/effectiveness of operations
• Implement monitoring activities / tools and

identify key results, lessons learned or
improvement areas
Overall Expectations
• It is impossible to teach you all agenda items in
short course
• We will touch on areas for you to understand the

area, know risks/ issues involved, ways to begin
to manage/ monitor it and where to go for more
information
Expectations
• Experience Sharing – everyone
shares their thoughts
• Group work is the norm as it allows

the best way for people to understand
issues
Agenda
• Day One
– Vision, Mission, Objectives and Culture
(Strategic Planning)
• Day Two
– Governance
• Day Three
– Management
Agenda
• Day Four
– Planning
• Day Five
– Risk Management
Vision, Mission, Objectives and
Culture (Strategic Planning)
What is Strategic Planning?
• Working through a process
to choose what is most
important to achieve
organizational success
What is Strategic Planning?
The determination of the most
effective way by which an
organization can achieve its ends
given the resources it can muster
and conditions it must operate in.
Key Elements of
Strategic Planning
Stakeholder Articulating the vision,
Assessment mission and objectives
Developing Defining
a strategy markets and
clients
Performing an
institutional Analyzing the
assessment environment
Key Management Decision Points
–Who are my strategic clients?
–Where to serve my strategic
clients?
–What product to deliver to
satisfy my strategic clients?
–Who are my competitors?
Key Management Decision Points
– How to respond to competition?
– What are the strengths of my
organization?
– Which strengths are unique and
hard to copy?
– What are the growth targets?
– Where does financing come from?
“Vision
is a core statement that
expresses what an organization
sets out to do,
for whom,
or “It is a long-term view or

and drives
ideal that why” the
organization”
Articulating the Mission
Mission
 Your mission
establishes the
organization’s guiding
principles and overall
 Your mission statement
direction.
is expression or a
declaration of
organizational purpose.
Generally, the statement of
mission addresses the
following:
What issues are you attempting to address
(ex. The lack of access by the poor to financial
services)?
How do you respond to these issues
(by providing financial services to low-
income entrepreneurs)?
Who are your intended clients

(farmers, vendors)?
What are your institution’s core values

(serving as an ongoing financial resource for members,
or achieving significant outreach and financial self-
sufficiency)?
Objectives
• Establish a measure for evaluating
the success of the business
• Set priorities for its management and

staff, who should be held accountable
for the accomplishment of the
objectives
Core Values
• Effective organizations identify

and develop a clear, concise
and shared meaning of
values/beliefs, priorities, and
direction so that everyone
understands and can
contribute.
Institutional Culture
• Every business has a distinct culture. It reflects

the values of the firm and its attitude about
change, technology and risk among other things.
• You can not see corporate culture, it is not in

the budget, it does not have a monetary
value but it is critical to growth of the
organization.
Institutional Culture
• It is made of core values. Core values are
essential and enduring beliefs that are not to be
compromised for financial gain or short term
expediency. They are the purpose of why the
company is in existence
• The culture affects management attitudes

toward customers, employees, shareholders,
and competitors. It affects what decisions are
made, how they are made and how well they are
implemented.
Group Work
• Review articles about MFIs and MF
Industry
• Discuss how this affects Strategic

Planning – VMOC
• Develop recommendations
Review Assessments for Strategic
Planning Process
• Discuss Handouts and assessment
process
• Discuss who completes and how to

analysis results
• Discuss how to incorporate in Strategic

and Business Plans
Key Elements of
Strategic Planning
Stakeholder Articulating the vision,
Assessment mission and objectives
Developing Defining
a strategy markets and
clients
Performing an
institutional Analyzing the
assessment environment
Strategy development for
objectives
• Short Term – now to one year
• Mid Term – 2-3 years
• Long term – 4-5 years
• Idea is to get out big picture items that will

need to be accomplished to ensure the
objective is achieved
Choosing a Strategy
The process of identifying a strategy

has three parts:
 choosing what products to offer in what
markets;
 deciding which areas of the institution need to
be strengthened to ensure that it can provide
the chosen products in the selected markets;
and
 determining clear objectives and activities for
implementing the product, market and
institutional development goals.
BP1.2-OH2.24
Monitoring the Strategic Plan
• Ratings
• Social Performance Measurements
• External Audits
• Board of Director Reports

Review of VMOC
• Quality MFIs have strong strategic planning
– Quality answers to key decisions points
– Vision and Mission clear / staff know and

implement
– Objectives are detailed and used to measure

success
Review of VMOC
• Quality MFIs have strong strategic planning
– Core values identified, nurtured and led by
example
– Strong monitoring and evaluation – ratings,

EA, SPM and Board Reports (on objectives)
– Reviewing and Updating of Strategic Plan

based on growth of MFI and/or industry
evolution
Governance
What is Governance?
• Vision and Mission
• Protects assets and resources
• Sets directions
• Protects interest of stakeholders

Why is Governance Important?
• MFI Performance and quality
• Deposits
• Transparency
• Accountability
Board Size and Composition
• Why is size important?
• Who should be members?
• What type of key skills should BOD

members have?
Selection and Orientation
• Recruitment – ongoing process
• Selection based on criteria
• Orientation important to success of

member
Roles and Responsibilities of
Board and Management
• The Board and management

should have a relationship
defined by partnership,
particularly between Board
Chair and the Chief Executive
Officer (CEO).
Roles and Responsibilities of
Board and Management
• Partnership refers to the mutual

support, trust, and respect
forged between two entities.
Real Risks & Case Studies
• Review distributed documents
• Determine issues
• Review questions and debate answers if any
• Make recommendations as if you were a BOD

member
Area of
Responsi
bility Board of Directors MFI Management
Preservati Overall Responsibility Responsible for

on of to preserve mission of preserving mission in all
Mission organization, or if aspects of executing
absolutely necessary, organizational
to amend mission as responsibilities
circumstances change
Social Responsible for Responsible for MFI
Perform establishing social achieving social
ance objectives in objectives agreed to
strategic plan and in strategic plan.
for evaluating CEO
according to those Responsible for
objectives. preparing reports on
progress to meet
social objectives.
Group Work
• Divide into three groups
• Identify all roles and responsibilities of Board
and Management
• List all the types on a piece of flipchart paper
(in the example of table from previous slides)
and notebook paper as you discuss
• Pick people to record the findings and make
the presentation
• You have 30 minutes.
How does the BOD Manage the
CEO?
• The Board as a whole manages

the CEO. Letting your CEO
know ahead of time exactly how
the Board will evaluate him/her
is good practice.
How does the BOD Manage the
CEO?
• Consider evaluating the CEO
based on achieving the results
agreed to in the approved
strategic plan and adherence to
written restrictive policy. This
makes the performance review
simple and fair.
Area of CEO Limitation:
Developing personnel policies
The Board of MFI agrees that the CEO may
set MFI’s personnel policies, except in the
following situations:
• The CEO sets his/her own salary and

benefits. (Salary and benefits will always
be established and approved by the
board).
Area of CEO Limitation:Financial
management and oversight
manage MFI’s financial decisions
according to the approved strategic plan or
the routine requirements of managing the
MFI, except in the following situations:
• Investments in assets or general

expenditures greater than $5,000
Area of CEO Limitation:
Establishing rates of interest
set interest rates on loans to customers of
MFI, except in the following situations:
• If the interest rate at any time is to exceed

5% per month. A ceiling higher than 5%
requires board approval.

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Welcome to the

Nuts and Bolts of Microfinance

• Identify risks that senior and branch

• Recognize planning needs and develop

• Understand key decisions points for a given

• Implement monitoring activities / tools and

• We will touch on areas for you to understand the

• Group work is the norm as it allows

or “It is a long-term view or

Who are your intended clients

What are your institution’s core values

• Set priorities for its management and

• Effective organizations identify

• Every business has a distinct culture. It reflects

• You can not see corporate culture, it is not in

• The culture affects management attitudes

• Discuss how this affects Strategic

• Discuss who completes and how to

• Discuss how to incorporate in Strategic

• Idea is to get out big picture items that will

The process of identifying a strategy

• Social Performance Measurements

• Board of Director Reports

– Quality answers to key decisions points

– Vision and Mission clear / staff know and

– Objectives are detailed and used to measure

– Strong monitoring and evaluation – ratings,

– Reviewing and Updating of Strategic Plan

• Protects assets and resources

• Protects interest of stakeholders

• Who should be members?

• What type of key skills should BOD

• Selection based on criteria

• Orientation important to success of

• The Board and management

• Partnership refers to the mutual

• Review questions and debate answers if any

• Make recommendations as if you were a BOD

Preservati Overall Responsibility Responsible for

• The Board as a whole manages

• The CEO sets his/her own salary and

• Investments in assets or general

• If the interest rate at any time is to exceed

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