MicroSave Market-led solutions for financial services

27
MicroSav MicroSav e e Market-led solutions for financial Market-led solutions for financial services services

description

MicroSave Market-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 - PowerPoint PPT Presentation

Transcript of MicroSave Market-led solutions for financial services

Page 1: MicroSave Market-led solutions for financial services

MicroSavMicroSavee

Market-led solutions for financial servicesMarket-led solutions for financial services

Page 2: MicroSave Market-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

Page 3: MicroSave Market-led solutions for financial services

Commercial

Banks

NGOs

MFIs

Cooperatives

Community

Organisations

Government

Banks

MicroSave

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

Page 4: MicroSave Market-led solutions for financial services

“Good governance is perhaps the single most important factor in eradicating poverty and promoting development.”

Kofi Annan, Secretary General, United Nations, 1997-2006

Page 5: MicroSave Market-led solutions for financial services

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

Page 6: MicroSave Market-led solutions for financial services

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

Page 7: MicroSave Market-led solutions for financial services

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

Page 8: MicroSave Market-led solutions for financial services

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!

Page 9: MicroSave Market-led solutions for financial services

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

Page 10: MicroSave Market-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

Page 11: MicroSave Market-led solutions for financial services

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

Page 12: MicroSave Market-led solutions for financial services

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

Page 13: MicroSave Market-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.

Page 14: MicroSave Market-led solutions for financial services

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.

Page 15: MicroSave Market-led solutions for financial services

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

Page 16: MicroSave Market-led solutions for financial services

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

Page 17: MicroSave Market-led solutions for financial services

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

Page 18: MicroSave Market-led solutions for financial services

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.

Page 19: MicroSave Market-led solutions for financial services

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

Page 20: MicroSave Market-led solutions for financial services

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

Page 21: MicroSave Market-led solutions for financial services

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

Page 22: MicroSave Market-led solutions for financial services

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

Page 23: MicroSave Market-led solutions for financial services

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

Page 24: MicroSave Market-led solutions for financial services

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

Page 25: MicroSave Market-led solutions for financial services

Equity Bank Over Time

-

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

Page 26: MicroSave Market-led solutions for financial services

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

Page 27: MicroSave Market-led solutions for financial services

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