E-Micro Finance Institutions -slides.ppt

ADVICE TO ALL EMPLOYEES

1. Build a home earlier. Be it rural home or urban home. Building a house at 50 is not an achievement. Don't get used to government houses. This comfort is so dangerous. Let all your family have good time in your house.

2. Go home. Don't stick at work all the year. You are not the pillar of your department. If you drop dead today, you will be replaced immediately and operations will continue. Make your family a priority.

3. Don't chase promotions. Master your skills and be excellent at what you do. If they want to promote you, that's fine if they don't, stay positive to your personal.
development.

4. Avoid office or work gossip. Avoid things that tarnish your name or reputation. Don't join the bandwagon that backbites your bosses and colleagues. Stay away from negative gatherings that have only people as their agenda.

5. Don't ever compete with your bosses. You will burn your fingers. Don't compete with your colleagues, you will fry your brain.

6. Ensure you have a side business. Your salary will not sustain your needs in the long run.

7. Save some money. Let it be deducted automatically from your payslip.

8. Borrow a loan to invest in a business or to change a situation not to buy luxury. Buy luxury from your profit.

9. Keep your life,marriage and family private. Let them stay away from your work. This is very important.

10. Be loyal to yourself and believe in your work. Hanging around your boss will alienate you from your colleagues and your boss may finally dump you when he leaves.

11. Retire early. The best way to plan for your exit was when you received the employment letter. The other best time is today. By 40 to 50 be out.

12. Join work welfare and be an active member always. It will help you a lot when any eventuality occurs.

13.Take leave days utilize them by developing yr future home or projects..usually what you do during yr leave days is a reflection of how you'll live after retirement..If it means you spend it all holding a remote control watching series on Zee world, expect nothing different after retirement.

14. Start a project whilst still serving or working. Let your project run whilst at work and if it doesn't do well, start another one till it's running viably. When your project is viably running then retire to manage your business. Most people or pensioners fail in life because they retire to start a project instead of retiring to run a project.

15. Pension money is not for starting a project or buy a stand or build a house but it's money for your upkeep or to maintain yourself in good health. Pension money is not for paying school fees or marrying a young wife but to look after yourself.

16. Always remember, when you retire never be a case study for living a miserable life after retirement but be a role model for colleagues to think of retiring too.

17. Don't retire just because you are finished or you are now a burden to the company and just wait for your day t

1. SymBanc™:
A Simulator for Microfinance Institutions
Gary Hirsch, Guy Stuart,
Jay Rosengard, Don Johnston
International System Dynamics Conference
July 20, 2005

2. Microfinance
•Financial services for the poor
•Services
–Savings
–Credit
–Insurance
–Remittances and transfer payments
•Poor = those living in households where the per
capita expenditure is less than $1 per day, in
developing and transitional economies
•2005 is the UN’s Year of Microcredit

3. Microfinance Institutions (MFIs)
•MFIs range in size and type from local savings
cooperatives to large (divisions of) commercial
banks
–E.g. Grameen Bank, Bank Rakyat Indonesia, BancoSol,
Compartamos, Mann Deshi Mahila Sahakari Bank
–Largest institutions are in Asia, especially South and
South-East Asia
•Mission can be one or all of:
–Financial intermediation
–Economic development
–Poverty alleviation
–Women’s empowerment

4. Active Clients
•Credit
–Active clients = has outstanding loan at time of report
–Microcredit Summit in 2004 reports that, as of 12/31/2003,
its 2,931 member institutions had just under 81 million active
clients --this is hard to believe
–Good guesstimate: 60m to 70m active clients
•More savers than borrowers
–“Big four” Bangladeshi MFIs have over 10m savers (same #
as borrowers)
–BRI has 30m savers (10x the # of its borrowers)
–Numerous credit unions and cooperatives provide savings
services
•No good count of insurance clients –many borrowers
pay for life insurance to cover the outstanding balance
of their loan in case they die
–New medical insurance products being developed-jury is out

5. Strategic Questions
•Urban/rural
•Women only, men and women
•Group or individual lending
•Credit only, or credit and savings

6. Operational Issues:
Information and Cash Flows
•Large number of small transactions:
–Swakrushi Federation of cooperatives in Andhra Pradesh,
India process about 80,000 savings deposits of Rs.20 (40
cents) per month, through 259 coops
–In May 2004 BRI made 211,320 loans with avg. size of just
under $1,000, through approx. 4,000 local offices
–ASA in Bangladesh had 264 borrowers and 290 savers per
staff member as of 12/31/2003 (mixmarket.org)
•Highly reliant on local, non-formal information, and
information feedback from own operations. Results in:
–Step lending
–Aggressive delinquency management based on good MIS
–Great emphasis on maintaining institutional reputation of
“fair but firm”

7. Overview of MFI Model: Drivers of BorrowingApplicantsBorrowersTarget Borrower
Population
Current Loans
by Stage
Funds Available
for Lending
MFI
Strategy
Branches, Loan
Officers and Other
Staff
Interest Rate
and Terms
Size of
Loans
Product
Design
Area
Demographics

8. Overview of MFI Model: Sources of FundsApplicants Borrowers
Target Borrower
Population
Current Loans
by Stage
Loan Losses
Funds Available
for Lending
Repayment
MFI
Strategy
Net Income
Branches, Loan
Officers and Other
Staff
Interest and Fee
Income
Interest Rate
and Terms
Size of
Loans
External Sources
of Funds
Product
Design
Savings
Area
Demographics
MFI Equity

9. Overview of MFI Model:Borrowing by StageStage 1 Stage 2 Stage 3
.
New
Borrowers
Current Loans
in Stage NNew to Stage N
Delinquent
in Stage NCuring
Delinquency
Becoming
Delinquent
Default
Repeating
Stage N
Going on to
Next Stage
Dropping
Out

10. Overview of MFI Model: Delinquency and DefaultApplicants BorrowersTarget Borrower
Population
Current Loans
by Stage
Delinquent Loans
by Stage
Cured
Delinquencies
Defaulted
Loans
Loan Losses
Funds Available
for Lending
Repayment
MFI
Strategy
Net Income
Branches, Loan
Officers and Other
Staff
Interest and Fee
Income
Interest Rate
and Terms
Size of
Loans
Dropout
External Sources
of Funds
Expenses
Product
Design
Savings
Area
Demographics
Cost of
Funds
MFI Equity

11. Design Features to Enhance Learning: The Model
•Realistic constraints eliminate easy options, require
thoughtful strategies
•Tradeoffs require careful choices--e.g., aggressive
marketing or high interest rates may increase
revenue, but attract poor credit risks or create
repayment problems
•Short-term profitability vs. long-term viability
•Easy to “paint yourself into a corner” and run out of
money despite early breakeven

12. Design Features to Enhance Learning: Interface
•Students can control how often decisions are made, must
keep their “eye on the ball”
•They can compare results across strategies to identify
relative advantages
•Capability to drill down into detailed results to understand
what’s happening
•Dump results to spreadsheet to do more extensive analysis
•Challenging scenarios let students reality-test strategies

13. Defining Target Market

14. Loan Product Design Decisions

15. Staffing and Productivity Decisions

16. Results: Profit and Loss

17. In High Growth Strategy, Borrowers Grow Until
MFI Runs Out of Cash...

18. …Even Though MFI is Profitable

19. Rapid Growth of Branch Network Has Kept MFI
from Building Equity Required by Funders

20. Less Aggressive Growth Strategy Permits
MFI to Build Equity...Capital Adequacy
1
0.75
0.5
0.25
0
06121824303642485460667278849096
Time (Month)
Capital Adequacy : high growth
Capital Adequacy : medium growth
Capital Adequcy Standard : medium growth
Medium
High

21. ...and Ultimately Attract More BorrowersTotal Borrowers
40,000
30,000
20,000
10,000
0
06121824303642485460667278849096
Time (Month)
Total Borrowers : high growth
Total Borrowers : medium growth
Medium
High

22. What Students Learn from Using SymBanc
TM
•There are characteristic ways of failing such as
growth outrunning capital or pursuing high volume at
the expense of profit and building equity
•There is no single right answer; multiple ways to
succeed depending on objectives
•Strategies dorequire internal consistency--the right
combinations of target market, product design,
staffing and branch expansion, and funding sources
•Good strategies under some circumstances may not
survive economic shocks; need to be resilient

23. SymBanc™ As A Teaching Tool (1)
•SymBanc™ developed initially for FIPED (Financial
Institutions for Private Enterprise Development)
–International executive program at KSG/Harvard University
–2-week program offered once a year since 1995
–Covers both microfinance and SME finance (MSMEs)
–Focuses on the sustainable provision of financial services
for MSMEs and low-income households
–Participants senior executives from financial institutions,
non-governmental organizations, and international
assistance agencies & high-ranking government officials
–Consists of core lectures, applied case studies, practical
exercises, simulated negotiations, participant presentations

24. SymBanc™ As A Teaching Tool (2)
•SymBanc™ funding from Harvard Provost’s Fund for
Instructional Technology –for promoting the
innovative use of IT in teaching
•Introduced in stages to facilitate familiarization
•Participants divided into three-person teams
•Taught as case studies
–Multiple scenarios with different policy objectives
–Preparation at home with discussions in class
–Interactive, iterative, and competitive
–Everything in one small file on rented laptops

25. SymBanc™ As A Teaching Tool (3)
•More efficient & effective than conventional means to:
–Introduce complex policy (strategic) and operational
(tactical) interrelationships
–Explore tradeoffs between achievement of institutional
mission and financial sustainability
–Confirm or refute assumptions and preconceptions
•Reflects messiness of real world
–No single “correct” answer -bundles of viable scenarios
–Important to identify and mitigate unanticipated shocks
–SymBanc™ simulation is truly a dynamic system