MicroSave Market-led solutions for financial services

1. MicroSaveMarket-led solutions for financial services

2. MicroSave India • Offices in Lucknow and Hyderabad • Applied Microfinance Institute, July 13-24, 2009 • ‘Mini’ AMIs every quarter in various locations • Nearly 50 professional staff conducting on-site training and technical missions with ‘Action Research Partners’ around India • Ongoing programme of research in India leading to curriculum revision/development

3. Built on Practical Work with a Variety of Types of Financial Institutions

4. “Good governance is perhaps the single most important factor in eradicating poverty and promoting development.” Kofi Annan, Secretary General, United Nations, 1997-2006

5. Benefits of Good Governance • Trust – the will and the capacity to keep promises to all stakeholders, including clients • Clear mission, vision, and relevant values • Connection to stakeholders • Financial stability

6. What is the Board’s Role in the Risk Management Program? • Ensuring that all material risks are identified. • Ensuring that risks are managed within thresholds that are acceptable -- • given the MFI’s goals, mission and appetite for risk. • Ensuring that management puts in place systems and procedures for ensuring compliance with risk management parameters, as vetted and approved by the board. COSO

7. What are Board’s Key Responsibilities? • Mission and vision: development, focus, and preservation • Board management and self governance • Executive oversight and management • Policy development and approval process • Financial and operational oversight and fiduciary responsibility • Strategic planning and development

8. Characteristics of a Board Member • Business Sense • Microfinance Experience • Financial Market Experience • Legal and Regulatory Experience • Marketing Expertise • Public Relations • Technology Expertise • Operations Expertise • Fundraising Experience Ability to discern, to think, to plan and to speak up!

9. The Risk Management Approach at MicroSave:Building capacity, supporting systems development and accelerating institutionalization MicroSaveMarket-led solutions for financial services

10. MicroSave’s Toolkits • Toolkits Available: • Introduction to Microfinance • Strategic Business Planning • Market Research for MF • Costing and Pricing of Products • Pilot Testing - Savings • Pilot Testing - Loans • Roll - Out: Going to scale • Loan Portfolio Audit for MFIs • Quantitative Research • Strategic Marketing • Product Marketing • Corporate Brand and Identity • Customer Service • Staff Incentives Scheme • HR Management • Process Mapping • Institutional and Product Risk Management • Training of Trainers • Individual Lending for Managers • Individual Lending for Officers • Governance for MFIs

11. MicroSave’s Toolkits • Toolkits Available (cont.): • Internal Audit and Controls • Basic Financial Accounting • Basic Financial Management & Ratio Analysis • Delinquency Management for Group-based MFIs • Management Information Systems for MFIs • Toolkits Under Development: • MFI-Out-Of-A-Box • Managing Rapid Growth in MFIs • Advanced Accounting • Advanced HR Management

12. Risk Management ToolsProcess mapping  risk analysis  compliance monitoring  institutionalizationMarket research  design  product piloting  institutionalization  product roll-out MicroSaveMarket-led solutions for financial services

13. Process Mapping • Process mapping is a powerful tool that can allow MFIs to see the process as it is today, and then imagine what it should be in the future, while reducing risks and improving efficiency. • It is a visual representation of a process, that uses symbols and arrows to display: • Inputs, • Outputs, • Tasks performed, and • Task sequence.

14. Process Maps Are Created for Three States • “As Is”- The “as-is” state is how the work is currently being performed. • “ShouldBe” -The “should be” state consists of the formallyrecommended state of performance. In many (if not most) cases the “as is” at the front line in the branches will vary significantly from the “should be”. • “CouldBe” - The “could be” state is a new level of performance that can be achieved via process redesign. Achieving “could be” is what true reengineering is all about.

15. Creating a Process Map Ten Basic Steps for Mapping a Process Step 1 Step 2 Step 3 Step 4 Identify Operational Gaps Choose Processes Assemble team Define Objectives Step 5 Step 6 Step 7 Step 8 Step 9 Step 10 Gather Data “As Is” Map Analyse “As Is” Map “Should Be” and “Could Be” Maps Share Findings Implement

16. MicroSave’s Five Phase Product Development Cycle • Evaluation and preparation • Market research • Concept/prototype design • Pilot testing • Product launch and rollout

17. New Product Development Risks • Motivation risk • Management/board commitment risk • Orphan-product risk • Demand risk • Positioning risk • Product mix risk • Competition risk • Counterparty risk • Operational risk (fraud, technology, management) • Delivery systems risk • Communication risk

18. Assess Risks in Product Development • The product development team should start with a high level overview of potential risks. • Look at internal and external risks, product and institutional risks.

19. Risk Management Feedback Loop 1. (Re) Identify, (Re) Assess and (Re) Prioritise Risks 2. Develop strategies to manage risks 5. Test effectiveness and evaluate results 3. Develop tactics to mitigate risks 4. Assign responsibility and implement

20. Tools Available To Assist With New Product Development Risk Analysis

21. Key Points To Consider In Institutionalising Risk Management • Where within your institution will responsibility for risk management reside? • What will be the reporting lines? • Selection of the Risk Manager • Formulation of a risk management policy • Documenting risk management processes in a risk management manual

22. Institutionalisation in Practice -Risk Management at Equity Bank (1) • Shifted to a formal risk management framework • Process mapping to identify and mitigate process risks was institutionalized • All major product delivery and other institutional processes were mapped and key risks identified

23. Institutionalisation in Practice -Risk Management at Equity Bank (2) • Compliance Department created to oversee: • Process mapping • Risk management and • Compliance managed by an experienced compliance manager. • Internal Audit Function strengthened to independently review internal controls

24. Institutionalisation in Practice -Risk Management at Equity Bank (3) • Risk Management Committee constituted, drawn from: • Credit • Treasury • Marketing • Finance • Operations • IT • Audit, and • Compliance departments as well as CEO and the Board • Risk Management Committee meets regularly

25. 1.84 million clients and $34 million profit before tax MicroSave Market-led inputs started here

26. Applied Microfinance Institute 2009 Jaipur, July 13-24 MFIs’ Stream • Process mapping • Internal audit and controls • Delinquency management • Human resource management Bankers’ Stream • Financial management • Loan portfolio audit • Capital structuring and MFI valuation

27. MicroSaveMarket-led solutions for financial services B-52 Kapoorthala Crossing, Mahanagar Extension, Lucknow 226006, Uttar Pradesh, India Email: info@MicroSave.net Websites: http://www.MicroSave.org www.India.MicroSave.org