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
Built on Practical Work with a Variety of Types of
Financial Institutions
Commercial
Banks
Government
NGOs
Banks
MicroSave
Community
MFIs
Organisations
Cooperatives
“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.
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
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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!
MicroSave
Market-led solutions for financial services
The Risk Management
Approach at MicroSave:
Building capacity,
supporting systems development and
accelerating institutionalization
MicroSave’s Toolkits
Toolkits 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.
13.
14.
15.
16.
17.
Corporate Brand and Identity
Customer Service
Staff Incentives Scheme
HR Management
Process Mapping
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 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
Toolkits Under Development:
1. MFI-Out-Of-A-Box
2. Managing Rapid Growth in
MFIs
3. Advanced Accounting
4. Advanced HR Management
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
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.
• 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.
Creating a Process Map
Step 1
Ten Basic Steps for
Mapping a Process
Identify
Operational
Gaps
Step 5
Step 6
Gather
“As Is”
Data
Map
Step 7
Analyse
“As Is”
Map
Step 2
Step 3
Step 4
Choose
Assemble
Define
Processes
team
Objectives
Step 8
Step 9
Step 10
“Should
Be” and
Share
“Could Be”
Findings
Maps
Implement
MicroSave’s
Five Phase Product Development Cycle
1.
2.
3.
4.
5.
Evaluation and preparation
Market research
Concept/prototype design
Pilot testing
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
1. (Re) Identify, (Re) Assess and (Re) Prioritise Risks
2. Develop
strategies to
manage
risks
5. Test
effectiveness
and evaluate
results
3. Develop
tactics to
mitigate risks
4. Assign responsibility
and implement
Tools Available To Assist With
New Product Development Risk Analysis
New Product Process
Tools
1. Evaluation and Preparation Institutional Risk Assessment
Institutional Risk Mitigation
Cross Product Risk Overview
2. Market Research
Market Research for MicroFinance Toolkit
3. Concept/Prototype Design
Market Research for MicroFinance Toolkit
Costing and Pricing Toolkit
4. Pilot Testing
Pilot Testing Toolkit
Process Mapping Toolkit
Product Risk Assessment
Product Risk Summary
Post Pilot Risk Assessment
5. Rollout
Product Rollout Toolkit
Pre 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:
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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
Deposit Clients
Profit Before Tax
2,000,000
40.0
1.84 million clients and $34
million profit before tax
1,800,000
35.0
1,600,000
Deposit Clients
1,400,000
25.0
1,200,000
1,000,000
20.0
800,000
15.0
MicroSave Market-led
inputs started here
600,000
10.0
400,000
5.0
200,000
-
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Profit Before Tax ($ millions)
30.0
Applied Microfinance Institute 2009
Jaipur, July 13-24
MFIs’ Stream
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Process mapping
Internal audit and controls
Delinquency management
Human resource management
Bankers’ Stream
• Financial management
• Loan portfolio audit
• Capital structuring and MFI valuation
MicroSave
Market-led solutions for financial services
B-52 Kapoorthala Crossing, Mahanagar Extension,
Lucknow 226006, Uttar Pradesh, India
Email: info@MicroSave.net
Websites: http://www.MicroSave.org
www.India.MicroSave.org