Support Services for MFO’s and MFI’s : Agricultural Finance Corporation Limited

Support Services for MFO’s and MFI’s

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A professionally developed business plan can launch MFI into a high growth trajectory. AFCL can prepare comprehensive business plans for MFIs with medium to long-term perspective. It can also help these MFIs monitor their performance vis-à-vis the plan.

The following are the components of business plan that we concentrate on to make it highly effective:

	Mission and Vision: An MFI needs to carefully articulate what is the reason for its existence and what does it want to become in the long-term. AFCL helps MFIs to define their mission and vision keeping a long-term perspective in mind.
	Governance Structure: Governance structure of MFI consists of the board of directors, which acts as an interface between MFI and external environment, and at the same time provide strategic support to overall operations.
	Organizational Structure: The organizational structure consists of the legal constitution, divisions and departments as well as the systems of authority and responsibility in the MFI. It defines the level of control, decision-making and growth potential of MFI.
	Market: MFIs need to clearly understand their market to be successful in long-term. They should understand various segments including different geographical areas, income groups or occupation groups.
	Human Resource Policy: The human resource policy of an organization consists of the recruitment, training and development of the people required at different levels. This is extremely important to achieve orderly growth and professional management.
	Accounting System and MIS: The accounting system and MIS consists of series of books of account and records to be kept at MFI as also the report generated at different levels and the flow of information from one level to the next. The MIS and accounting system are important from the point of view of effective management, compliance and regulatory standards, fulfilling the requirements of different stakeholders – lenders, donors as well as investors.
	Outreach Projections: The MFIs need to project how much clients they would reach, what would be average loan size and what would be the staff size. This would determine how much of loans they would disburse and how much funding they would require.
	Projected Financial Statements: The outreach projections along with the estimates of investments made and costs incurred to achieve the projected outreach provide the basis for projecting financial statements. One of the most important functions of these projections is that they help to determine the break-even level of the operations.

Incubation

We identify entrepreneurs who have vision to carry out a microfinance program on a sustainable basis, but may not have required skills and exposure. We help them in various aspects so that they are able to create and lead a professional MFI.

	Getting required exposure: We help these organizations/entrepreneurs in getting required exposures - to the extent possible we expose them to MFIs already operating in similar socio-economic environment.
	Preparing the Business Plan: We prepare a comprehensive business plan, for such organizations/entrepreneurs, consisting of strategic, operational and financial plan which guides them step-by-step in different aspects and at different stages of the lifecycles of the MFIs.
	Setting up Governance and Management Structures: We help start-ups in setting required governance and management structures depending on their requirement.
	Getting Finances: With our reach to several banking institutions, we liaison on behalf of such MFIs to mobilize grant, equity and loan funds. We will also help these MFIs in shaping an appropriate capital structure.

Mentorship

Mentorship is for those MFIs that have started microfinance operations but are finding it difficult to cope with the increasing complexities of managing growth and performance. This service allows the clients to obtain the advisory services of AFCL on the continual basis. In involves regular onsite visit by our professional coupled almost regular contact over the telephone or email. The objective of this service is to provide professional advice to MFI on almost any issue of interest. This not only helps in improved management of operations, but also helps in developing in-house capacity of the MFI.

Some of the areas in which the professional advice is provided are as follows:
	Legal and Organizational Structure
	Business Planning
	Risk Management
	Transformation from MFI to NBFC
	Human Resource Plan and Policy
	Product Development and Delivery Methodology
	Growth and Expansion Strategy
	Funds Mobilization Strategy
	MIS /Accounting / Internal Control System

Investor Services

Following services are specifically targeted for investors and donors:
Valuation Services for Equity Investment
Many MFIs find it difficult to grow as they lack equity capital. Typically they do not have any experience with private equity and hybrid instruments. At the same time they are attractive equity investment destinations given their unique proposition of social as well as economic returns. We help such MFIs value their equity and negotiate with investors.

We undertake due-diligence on behalf of investors who want to fund MFIs. Our professional advice ensures that investments realize required returns. The broad areas that are investigated are as follows:
	Profile of the promoters and the key people/organizations associated with the MFI/proposed MFI.
	Legal Structure
	Business as well as revenue model
	Business Plan
	Operating Strategies
	Competition in the current and proposed market areas
	Existing and proposed sources of finances
	Existing liabilities
	Human resources
	MIS, accounting and internal control systems

It is important for investors to monitor performance of MFIs on a periodic basis. We undertake on-site and off-site monitoring on behalf of investors who engage us so as to ensure optimum utilization of funds and safety of investments. Some of the parameters which are monitored are as follows:
	Changes in the legal and organizational structure.
	Growth in operations
	Changes in strategies
	Performance vis-à-vis business plan
	Changes in human resource profile
	Changes in quality of management systems
	Changes in the portfolio quality
	Changes in the equity and liability structures
	Changes in profitability and capital adequacy
	Change in the risk profile

Many MFIs require capacity enhancements in order to perform professionally on the sustainable basis. We undertaken capacity building needs assessments for MFIs in order to point out specific areas of improvement.

Market and Industry Research

We undertake customized research in microfinance space. Typical clients for these researches are funding agencies, banks, insurance companies, equity or debt capital funds, government agencies and NGOs. The research is tailor made as per client’s requirement, and accordingly scope and deliverables are finalized in close consultation with clients.

Some areas of our research interest are:
	Structural: Relating to different organizational forms like NGO MFIs, NBFC MFIs, Co-operative Societies, Co-operative Banks and Regional Rural Banks.
	Regional: Based on the particular geographical region like Northern India or Southern India.
	Thematic: Based on particular theme relating to MFIs like demand and supply, legal structures, capital structures, profitability, portfolio quality and operating efficiency.

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