Product Development Strategies, Strategic Planning for MFIs by olTSOqJu

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									CARIB CAP PROJECT

MICRO CREDIT LIMITED
     Experience
                    MICRO CREDIT LIMITED
                   Micro Credit Limited (MCL) is an
                   independent microfinance institution,
                   established with the purpose to serve the
                   low end of Jamaica’s microfinance market
                   in a sustainable manner. MCL employs the
                   Latin American ‘Solidarity Group’
                   methodology – 80% of GLP
COMPANY MISSION
To provide trust based micro credit in a fair and consistent manner
for the progress and growth of micro-enterprises, their owner’s and
their communities through the building of long term relationships
COMPANY VISION
Our long term vision is for the quantitative and qualitative
improvement in the economic and social lives of our clients and for
MCL to be established as the preferred independent financially
self-sufficient microfinance institution on the island
            Key Indicators
At the end of December 2010 some of
the company’s key indicators included:

   Gross Loan Portfolio of USD880,000
   2400 customers (80% of whom are
    women)
   Average loan size of
    USD370
   Write Off Ratio of less
  than 1%
  MICRO CREDIT LIMITED
             Major Constraints
Under the CARIB CAP Project, MCL identified as its major
constraints

 Low productivity ratios in comparison to benchmarking
  standards due largely in part to our small loan size and the
  absence of economies of scale within our niche market.

 A remuneration scheme that is not only qualitatively driven but
  should also be quantitatively driven with interconnectivity with
  company targets

 The need for a more structured approach in the monitoring of
  delinquent clients

 The need for Product Diversification and Differentiation
  strategy in order to remain commercially viable

 MICRO CREDIT LIMITED
      Intervention & Operational
             Adjustments
Emergency Collection Drive
A list of loans over 30 days were selected to be targeted for 4 months.
The action plan detail included:

 Each loan officer setting aside one full day per week to work on
  arrears which included client visitation
 A Defaulter Tracking Card
 Weekly review of the Drive
 A special incentive scheme whereby Credit Officers received up to
  25% of all amounts collected

                                        Achievement
                                        The total loans targeted was
                                        approximately USD 62,000 of
                                        which a little over 50% was
                                        collected by the end of the
                                        Collection Drive
   MICRO CREDIT LIMITED
     Intervention & Operational
            Adjustments
Revamped Incentive Scheme
Challenge: Maintaining motivated field officers due to the nature of the job

Strategy –
 Ensure inter connectivity between individual’s performance and the
   company’s goals/targets

 Reward staff as such as this will not only assist with staff motivation but
   also improve productivity, portfolio quality and the organization’s overall
   profitability.

 Scheme should be both quantitatively and qualitatively driven.
                                                  Implementation Strategy
                                                  For smooth transition –
                                                  Bottom up Approach
  MICRO CREDIT LIMITED
     Intervention & Operational
            Adjustments
Revised Group Lending Methodology
MCL has a very detailed process in
evaluating group loans - financially
and time consuming

New Policy Changes which included
 Standardized Loan Repayment Terms and Amounts
 Cash Collateral of up to 25% of approved loan amounts
 Eliminating the economic evaluation of the client business and household
  budget and information
 Not investigating loan purposes or use
                          These new policies were aimed at:
                          • Increasing the outreach of MCL
                          • Reducing the time and cost of loan appraisal process
                          • Increasing the productivity of the loan officers
                          • Lowering the risk of loans through the cash collateral
   MICRO CREDIT LIMITED
  Intervention & Operational
         Adjustments
Pilot test for Revised Group Lending Methodology
The new product was piloted at our Down Town (Kingston) branch.
For the four month period, over 100 loans were issued totaling
approximately USD25,000 of which PAR over 30% at the end of the
same period was only 1.9% (only one group fell into arrears)

Mixed Reviews:
 No significant savings in time or costs
 No way to track client’s socio-economic growth overtime
 Heavy reliance on Loan Officers perception on knowledge which is
  all lost should LO leaves company
 Negate current repayment capacity – risk of larger loans going into
  arrears


MICRO CREDIT LIMITED
      Intervention & Operational
             Adjustments
Portfolio Diversification and Risk Management Training
Low barriers to entry into this sector means increased competition and
as such MCL has to reposition itself as a viable alternative - Diversify

A DID volunteer mission was carried out from
March 14 – April 8, 2011 to provide guidance on
redesigning our Individual Loans and to provide
the associated training for Product roll out

Policy Changes include
 Individual loans should be kept at a maximum 25% of Gross Loan
  Portfolio
 Standardize the terms and amounts for first time borrowers
 Streamline the financial analysis and the repayment schedules

   MICRO CREDIT LIMITED
    Intervention & Operational
           Adjustments
Product Differentiation – Client Education & Financial Literacy
For MCL to remain competitive, it is imperative for us to differentiate our
Products and Services. This can be achieved by:
     Improving client satisfaction through additional services
     Lowering the transactional costs associated with accessing loans

Leveraging one of our key strengths – trust based relationship
Strategy for new products roll out and differentiation - add on services that
will come at zero cost to our clients
     This includes developing an 8 module educational program
     This will not only provide added value to our products
      and services and improve client retention but also
      improve portfolio quality and the clients own
      socio-economic growth




 MICRO CREDIT LIMITED
              Overall Impact
The overall impact of the Project has been a positive one

Measurable results have been an overall improvement in
portfolio quality which includes
    A minimized gap between actual and expected yield on portfolio
     by at least 15%,
    Decrease in loan loss provisions with better loan risk
     management techniques and
    An increase in our Productivity ratio of 10%

We have also successfully diversified our loan portfolio with
risk mitigation steps in place.
    Currently our individual loans form up to 20% of our GLP. We
     are also looking into developing additional loan products and
     services


 MICRO CREDIT LIMITED
                   Overall Impact
 Staff Training
  Collection and Portfolio
  Risk Management, Customer Service
  and Strategic Development

 Client Training
  Book Keeping, Profit Determination, Disaster Risk
  Management
           THANK YOU!!




MICRO CREDIT LIMITED

								
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