MicroSave Market-led solutions for financial services
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Transcript of MicroSave Market-led solutions for financial services
MicroSavMicroSavee
Market-led solutions for financial servicesMarket-led solutions for financial services
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
Commercial
Banks
NGOs
MFIs
Cooperatives
Community
Organisations
Government
Banks
MicroSave
Built on Practical Work with a Variety of Types of Financial Institutions
“Good governance is perhaps the single most important factor in eradicating poverty and promoting development.”
Kofi Annan, Secretary General, United Nations, 1997-2006
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
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
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
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!
The Risk Management Approach at MicroSave:
Building capacity, supporting systems development and
accelerating institutionalization
MicroSavMicroSavee
Market-led solutions for financial servicesMarket-led solutions for financial services
MicroSave’s ToolkitsToolkits Available:
1. Introduction to Microfinance
2. Strategic Business Planning
3. Market Research for MF
4. Costing and Pricing of Products
5. Pilot Testing - Savings
6. Pilot Testing - Loans
7. Roll - Out: Going to scale
8. Loan Portfolio Audit for MFIs
9. Quantitative Research
10. Strategic Marketing
11. Product Marketing
12. Corporate Brand and Identity
13. Customer Service
14. Staff Incentives Scheme
15. HR Management
16. Process Mapping
17. Institutional and Product
Risk Management
18. Training of Trainers
19. Individual Lending for
Managers
20. Individual Lending for
Officers
21. Governance for MFIs
MicroSave’s Toolkits
Toolkits Under Development:
1. MFI-Out-Of-A-Box
2. Managing Rapid Growth in
MFIs
3. Advanced Accounting
4. Advanced HR Management
Toolkits Available (cont.):
22. Internal Audit and Controls
23. Basic Financial Accounting
24. Basic Financial Management &
Ratio Analysis
25. Delinquency Management for
Group-based MFIs
26. Management Information
Systems for MFIs
Risk Management Tools
Process mapping risk analysis compliance monitoring institutionalization
Market research design product piloting institutionalization product roll-out
MicroSavMicroSavee
Market-led solutions for financial servicesMarket-led solutions for financial services
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.
• 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.
• It is a visual representation of a process, that uses symbols and arrows to display:• Inputs,• Outputs, • Tasks
performed, and • Task sequence.
Process Maps Are Created for Three States
• “As Is” - The “as-is” state is how the work is currently being performed.
• “Should Be” - The “should be” state consists of the formally recommended 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”.
• “Could Be” - 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.
• “As Is” - The “as-is” state is how the work is currently being performed.
• “Should Be” - The “should be” state consists of the formally recommended 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”.
• “Could Be” - 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.
Ten Basic Steps for
Mapping a Process
Ten Basic Steps for
Mapping a Process
Step 1Step 1
Identify
Operational
Gaps
Identify
Operational
Gaps
Step 2Step 2
Choose
Processes
Choose
Processes
Step 3Step 3
Assemble
team
Assemble
team
Step 4Step 4
Define
Objectives
Define
Objectives
Step 7Step 7
Analyse
“As Is”
Map
Analyse
“As Is”
Map
Step 8Step 8
“Should
Be” and
“Could Be”
Maps
“Should
Be” and
“Could Be”
Maps
Step 9Step 9
Share
Findings
Share
Findings
Step 10Step 10
ImplementImplement
Step 5Step 5
Gather
Data
Gather
Data
Step 6Step 6
“As Is”
Map
“As Is”
Map
Creating a Process Map
MicroSave’s Five Phase Product Development Cycle
1. Evaluation and preparation
2. Market research
3. Concept/prototype design
4. Pilot testing
5. Product launch and rollout
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
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.
Risk Management Feedback Loop
3. Develop
tactics to
mitigate risks
4. Assign responsibility
and implement
1. (Re) Identify, (Re) Assess and (Re) Prioritise Risks
2. Develop
strategies to
manage
risks5. Test
effectiveness
and evaluate
results
Tools Available To Assist With New Product Development Risk Analysis
New Product Process Tools
1. Evaluation and Preparation Institutional Risk AssessmentInstitutional Risk MitigationCross Product Risk Overview
2. Market Research Market Research for MicroFinance Toolkit
3. Concept/Prototype Design Market Research for MicroFinance ToolkitCosting and Pricing Toolkit
4. Pilot Testing Pilot Testing ToolkitProcess Mapping ToolkitProduct Risk AssessmentProduct Risk SummaryPost Pilot Risk Assessment
5. Rollout Product Rollout ToolkitPre Rollout Risk Assessment
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
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
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
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
Equity Bank Over Time
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200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Dep
osit
Clie
nts
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
Pro
fit
Bef
ore
Tax
($
mill
ions
)
Deposit Clients Profit Before Tax
MicroSave Market-led inputs started here
1.84 million clients and $34
million profit before tax
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
MicroSaveMarket-led solutions for financial services
B-52 Kapoorthala Crossing, Mahanagar Extension,
Lucknow 226006, Uttar Pradesh, India
Email: [email protected]
Websites: http://www.MicroSave.org
www.India.MicroSave.org