nuts-and-bolts-2010-day-i-and-ii.ppt gdjev

1. Welcome to the
Nuts and Bolts of Microfinance

2. 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

3. 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

4. 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

5. Expectations
• Experience Sharing – everyone
shares their thoughts
• Group work is the norm as it allows
the best way for people to understand
issues

6. Agenda
• Day One
– Vision, Mission, Objectives and Culture
(Strategic Planning)
• Day Two
– Governance
• Day Three
– Management

7. Agenda
• Day Four
– Planning
• Day Five
– Risk Management

8. Vision, Mission, Objectives and
Culture (Strategic Planning)

9. What is Strategic Planning?
• Working through a process
to choose what is most
important to achieve
organizational success

10. 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.

11. Key Elements of
Strategic Planning
Articulating the vision,
mission and objectives
Defining
markets and
clients
Analyzing the
environment
Performing an
institutional
assessment
Developing
a strategy
Stakeholder
Assessment

12. 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?

13. 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?

14. is a core statement that
expresses what an organization
sets out to do,
for whom,
and why”
or “It is a long-term view or
ideal that drives the
organization”
“Vision

15. Articulating the Mission
Mission
 Your mission establishes the
organization’s guiding
principles and overall direction.
 Your mission statement is
expression or a declaration of
organizational purpose.

16. 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)?

17. 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

18. 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.

19. 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.

20. 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.

21. Group Work
• Review articles about MFIs and MF
Industry
• Discuss how this affects Strategic
Planning – VMOC
• Develop recommendations

22. 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

23. Key Elements of
Strategic Planning
Articulating the vision,
mission and objectives
Defining
markets and
clients
Analyzing the
environment
Performing an
institutional
assessment
Developing
a strategy
Stakeholder
Assessment

24. 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

25. 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

26. Monitoring the Strategic Plan
• Ratings
• Social Performance Measurements
• External Audits
• Board of Director Reports

27. 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

28. 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

29. Governance

30. What is Governance?
• Vision and Mission
• Protects assets and resources
• Sets directions
• Protects interest of stakeholders

31. Why is Governance Important?
• MFI Performance and quality
• Deposits
• Transparency
• Accountability

32. Board Size and Composition
• Why is size important?
• Who should be members?
• What type of key skills should BOD
members have?

33. Selection and Orientation
• Recruitment – ongoing process
• Selection based on criteria
• Orientation important to success of
member

34. 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).

35. Roles and Responsibilities of
Board and Management
• Partnership refers to the mutual
support, trust, and respect
forged between two entities.

36. 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

37. Area of
Responsi
bility Board of Directors MFI Management
Preservati
on of
Mission
Overall Responsibility
to preserve mission of
organization, or if
absolutely necessary,
to amend mission as
circumstances change
Responsible for
preserving mission in all
aspects of executing
organizational
responsibilities

38. Social
Perform
ance
Responsible for
establishing social
objectives in
strategic plan and
for evaluating CEO
according to those
objectives.
Responsible for MFI
achieving social
objectives agreed to
in strategic plan.
Responsible for
preparing reports on
progress to meet
social objectives.

39. 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.

40. 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.

41. 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.

42. 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).

43. Area of CEO Limitation:Financial
management and oversight
The Board of MFI agrees that the CEO may
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

44. Area of CEO Limitation:
Establishing rates of interest
The Board of MFI agrees that the CEO may
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.