To achieve the above-stated strategic objective, MSP must pursue the following strategies:
1. Outreach Expansion
2. Institutional Strengthening
3. Attaining Financial Sustainability
4. Annual Strategic Review
The description of these strategies is given as under:
1. Outreach Expansion
Outreach and sustainability are two critical and interrelated objectives for MFIs. Compelled by its goal of attaining the status of a financially self-sustained MFI, MSP will have to rapidly expand its outreach. The success of this expansion is mainly associated with the availability of appropriate funds for on lending. MSP will place an adequate focus on mobilizing the required financial resources for this purpose.
In order to realize the purpose of outreach expansion successfully, MSP will carry out the following activities:
Opening New Branches:
While placing equal focuses both on horizontal and vertical expansion, MSP will keep continue to open new branches at the planned places during the upcoming three years. During the course of this business plan. MSP will open new branches after reaching at least 2,000 clients in existing branches, which is a level where a branch keeps itself sustainable.
Market Research & Client-responsiveness:
MSP is of the view that a clear-cut information of the potential markets and an adequate understanding of the clients’ needs play a vital role in the success of MFIs. Therefore, MSP will be conducting comprehensive market surveys to identify both positive and negative factors and their possible impacts on the organization’s growth. This will help the organization identify the promising markets for expansion, reach right clientele and develop demand-driven products and services.
Besides offering demand-driven products, client-responsiveness will be demonstrated through quick processing of loan requests and more dignified treatment. All these factors will result in maintaining a high rate of client retention and deepen the outreach in targeted markets.
In order to fully realize the development objectives of microfinance, MSP will remain engaged in social mobilization. People organized in small groups and centers will be given orientation and training on different issues like health, education and other social, economic and political issues that affect their lives. This will result in an enhanced knowledge and understanding of communities on relevant issues.
Entrepreneurship Development Services:
Capital is not the only factor that allows for the creation or growth of enterprises. Entrepreneurship development is sometimes constrained by some non-financial services such as information, education, technical skills and access to market. Parallel to availability of finance, enterprise development therefore requires a range of relevant entrepreneurship development services (EDS) including technical, vocational, marketing and managerial trainings and a support for linkages development. MSP will be helping its clientele in in developing linkages with technical and vocational institutes in the target market. This will help the clients reduce their financial risks and gain income security. Moreover, it will reduce the MSP’s portfolio risks as well. Besides the organization will also arrange in-house Community Management Skills Trainings (CMSTs) for community leaders.
2. Institutional Strengthening
For achieving the program goal of a financially self-sustained MFI, it is necessary to successfully realize the planned scale and outreach during the coming two years. The success of the planned expansion is closely dependent on the institutional strengthening in addition to availability of required funds. MSP will therefore place a parallel focus on building its institutional capacity as a specialized microfinance provider. For this purpose, following activities will be carried out:
Human Resource Development:
People of any organization are the biggest source of determining the degree of its success. Therefore, MSP pledge to invest in human resource development on continuous basis. People at different positions will be given regular and relevant trainings. Besides availing the training opportunities offered by other institutions, MSP will be conducting internal trainings for branch managers and credit officers. The training manuals developed for this purpose will continuously be reviewed to make them more effective and relevant. Moreover, staff members will be given opportunities of exposure visits to established MFIs to learn from their experiences. In past, trainings on following concepts have been provided to staff at both operations and support level;
1. Boulder Microfinance Training Program
2. Refresher on Credit Policies and Procedures
3. Developing Appraisal Skills
4. Leadership and Team Management
5. Conflict Resolution
Small and Medium Enterprise Lending Expertise
Initially provision of microcredit was done through group lending methodology with small loan size globally and similarly in MSP. However, with the passage of time, individual lending and larger loan were introduced mainly because of absence of financing options for small and micro entrepreneurs and graduating clients of MSP demanded larger loans. SME loans are offered to individuals and are considered riskier than group lending. In spite of these challenges, MSP started SME loan program to cater this untapped market of SMEs and graduating clients with success. Under SME loan product MSP allow loans only to:
1. Graduated clients of MSP microfinance program, and
2. New SME clients from market
The purpose of SME loans was to target small and medium enterprises and to build deeper relationships with group lending clients who wanted to grow their businesses from micro to small and medium scale. At the same time, it helped to expand the clientele base by reaching out to new entrepreneurs who have limited resources but have sound business growth plan. SME loans have also boosted local employment opportunities and contribute to local economic development.
MSP plans to take advantage of this base and expand with state of the art branch model for SME Branches in each cluster in near future.
Strengthening Institutional Systems:
MSP has developed standardized operating and management systems in the form of written manuals. To make these systems more effective and efficient, the organization will seek consultancy of relevant technical assistance providers. While reviewing the systems, financial management, internal controls, HR policies and appraisal procedures will remain a prime focus of MSP.
Independent Internal Audit
MSP has developed strong and independent internal audit unit within the organization, reporting directly to the CEO and with a well-planned work plan to monitor all operations and processes at all levels (operations and support departments) on regular basis. This function will further facilitate strict compliance to policies, procedures and regulatory requirements. During the coming years, it is envisaged that Internal Audit function will strongly support the identification of gaps, updation of policy and procedures and new products development.
MSP has functional MIS and FIS systems in place, both at Head office and field level. The automated system generates timely reports. The MIS, developed by M/s Generix Solution, is a web based operating system. The system is continuously improved to enhance the features and ensure transparent reporting mechanism. During the year under review, MSP, in order to further improve management information system, MSP signed an agreement with Pakistan Microfinance Network for Digital Services Platform Components
Strengthening Institutional Values:
MSP has learned that the institutional values greatly affect the operations. Therefore, MSP is determined to put the established values into practice to construct and strengthen a value-based institutional culture.
Efficient HR Management:
In order to ensure optimum productivity of the MSP’s human resources, the organization will work to streamline its HR policies and procedures. These include development of an appropriate hierarchical structure, segregation of functions and duties, performance measurement systems, defining job descriptions & specifications and establishing an environment of accountability. HR management also involves such an appropriate culture that fosters people’s abilities and keeps them motivated and committed.
Governance is a process by which a board of directors, through management, guides an institution in fulfilling its mission and protects the institution’s assets. Fundamental to good governance is the ability of individual directors to work in partnership to balance strategic and operational responsibilities. MSP visualizes such an effective board that provides proper guidance to management regarding the strategic direction for the institution, and oversees management’s efforts to move in this direction. MSP will work to further strengthen the interplay between board and management as it is an essential component for the successful evolution of the institution.
Improving Performance Measurement:
In order to track the organization’s financial and social performance, MSP will continuously work to improve its capacity to measure its performance. Technical Assistance will be sought to improve effectiveness, efficiency and transparency of its reporting systems. Practices in financial reporting and analysis will particularly be streamlined and improved to measure the required efficiency of operations. Moreover, measuring social performance will be another area to be strengthened.
Developing the Organization’s Visibility:
To be recognized as one of the mainstream microfinance providers, MSP will work to enhance its visibility and win the due recognition. To this end, the organization will work on getting membership of international networks like WWB and MIX etc. MSP already is member of national and provincial microfinance organizations networks like PMN, PMFN and MON-PAK. Getting rated from the international rating agencies will be another tool for enhancing the organization’s visibility. Moreover, MSP plans to take part in national and international competitions like Citigroup-PPAF Micro entrepreneurship Award, CGAP Pro-poor Innovation Award and CGAP Transparency Award etc. Additionally, MSP will place a due consideration on developing and disseminating relevant reports, case studies and other publications.
3. Attaining Financial Sustainability
Microfinance best practices around the world suggest that financial sustainability is an achievable goal for MFIs. However, the foremost requirement of financial sustainability is an efficiently managed sufficient scale and outreach. MSP is fairly conscious about the significance of sustainability and it is committed to be a financially self-sufficient MFI over the time. For this purpose, the organization has devised the following strategies:
Accessing Subsidized Financing:
To meet this requirement, the organization will actively pursue Capital markets, international lending and the Pakistan Microfinance Investment Company (PMIC) in fulfilling its eligibility criteria and other requirement. Capital markets, international lending and the Pakistan Microfinance Investment Company (PMIC) all provide avenues for MFPs to meet their increasing financing needs. Continued economic stability will continue to play a crucial role in the progress of the sector. In addition, players need to strengthen their corporate governance, build capacity, focus on product development and innovation and explore newer markets to become an increasingly important part of the financial landscape.
Keeping operating and management costs as low as possible is another significant factor that greatly favors the purpose of financial sustainability. Especially, lower operating expense ratios are translated into a better operational self-sufficiency (OSS). Therefore, MSP has adopted such practices that help maintain the operating costs as low as possible. To this end, the branch-level expenses have been kept predetermined and standardized.
Exclusive Focus on Branch-level Efficiency:
The MSP microfinance program model is decentralized and proposes a continued growth through standardized branches network. In order to support the purpose of financial sustainability, MSP places an exclusive focus to achieve the required efficiency of the branches. The branches will be facilitated and rigorously monitored to achieve their targets of disbursement and maintain 100% rate of recovery. Moreover, the number of clients per CO will be kept rational and near to the industry’s best figures.
4. Annual Strategic Review
The degree of success in achieving the goal of a financially self-sufficient MFI is closely dependent on the degree of success and implementation of the four years’ business plan and the financial projections associated with this plan. Therefore, MSP will conduct formal strategic reviews on annual basis in addition to a continued monitoring and tracking the progress made in the course of implementing the business plan. This will help revitalize and/or adapt the defined set of strategies to achieve the intended goal.