Diagnosing the state of affairs at a client institution and providing actionable advice.
Full-fledged Institution Management
The Bank or MFI owner concludes a Management Services Agreement (MSA) with impactiive®, and at request of the Bank or MFI, every management decision and responsibility remain with impactiive®.
Executive Secondment, Coaching, and Support
impactiive® will support the existing Bank executives, or provide management capacities in delivering strategic projects, rightsizing/ operational turnaround, or exit preparation (IPO or sale) for the client. Key management and/or governance roles may be taken over by impactiive®.
Project Management and Organization Transformation
Compilation and execution of plans on project specific deliverables established by the financial institution.
Turnaround Success Stories
Re-design of a Control Environment During High Growth Stage for a Leading MFI in Azerbaijan
The impactiive® Partner led the project to re-design finance and control functions at a leading microfinance institution in Azerbaijan. This helped the institution triple its asset size and double profitability while maintaining loan portfolio quality within PAR30 0.5%.
As the financial institution transitioned from an early stage MFI towards a fast growth financial institution, it identified inefficiencies and gaps in operational risks controls, functional areas and the overall organizational structure. The impactiive® Partner and his team identified and established (a) verification processes for all finance operations, (b) functional roles and responsibilities within the finance department, as well as (c) clear reporting lines to ensure ownership of a particular functional area.
As a result of this project, the financial institution grew from $20m to $60m in asset size while decreasing its operating expense (OpEx) ratio from 29% to 21%. Key finance control functions were centralized across the countrywide branch network; allowing dual control over daily operations to manage risk, grow sustainably, and become a leading MFI in the market.
Resolving Liquidity Crisis for an MFI in Kosovo
The impactiive® Partner led the finance function at an established MFI in Kosovo and resolved a liquidity crisis for the entity within the first 12 months in the position. The MFI faced an immediate adverse situation when:
- The next debt repayments for its only two international lending partners were due in the next quarter with 30% of total funding to be repaid, and no roll-overs arranged.
- The owner was not able to provide bridge funding, and no other local commercial or governmental funding sources were available.
- The MFI had positive growth prospects in the market, but the funding squeeze forced management to limit new customer loan disbursements. This resulted in revenues 12% below the target, and portfolio quality deterioration with provision expense increasing by 55% and 17% in the next 3 and 6 months respectively for that financial year.
- The reputation and trust with the lending partners was damaged due to delays and poor quality of financial reporting.
The impactiive® Partner came up with a solution and aligned it with relevant stakeholders for long lasting institutional effects. Within 12 months, the MFI was able to accomplish the following milestones:
- The number of international lending partners increased from 2 to 6, and kept increasing as the MFI continued to grow as a result of restored trust and credibility with its partners.
- No further interruptions in loan disbursements to the customers were imposed by management.
- Funding cost improved by 350 basis points, on average.
- The MFI was able to reduce its liquid cash position to 5% of the total assets allowing to optimize expenses even further.
Successful Implementation of a Tailored Credit Product at an MFI in Georgia
The impactiive® Associate initiated and led the project to design a modified credit product at a leading MFI in Georgia. This initiative helped to reduce portfolio at risk (PAR) by 0.8% in specific client segments affected by seasonal fluctuations. Essentially, the modified product facilitated matching client cash flows throughout the year with the loan payment schedules.
The MFI had been successfully operating in Georgia for more than 12 years, when the impactiive® Associate identified a pattern of increasing PAR levels during the summer months for specific loan types and locations. Thorough analysis of a 3-year trend, consultations with the credit staff and clients in the field were made before the Associate set up an internal working group to address the issue. The working group identified the need for a loan product with an extended grace period after identifying the following causes affecting client payment capacity:
- Clients herded cattle in remote areas during Spring and Summer seasons and lacked physical access to financial infrastructure during that period.
- Clients with crops did not generate sufficient cash flow to cover the loan installments (including interest payments) before the harvesting season.
Based upon the analysis performed, consultations and internal approvals working group proceeded with introduction of a “Zero-Grace” loan product that allowed grace period of up to 9 months on both interest and principal payments. The product was launched as a pilot with a maximum limit of 5% of the total loan portfolio. Clients received the Zero-Grace loan very well, and an initially set limit was utilized during 2 months since the launch.
Two years after the Zero-Grace loan introduction, the impactiive® Associate conducted a detailed analysis of the product performance. The analysis showed that overall loan portfolio PAR was smoothed during the Summer months, and the product did not demonstrate materially higher levels of PAR compared to the traditional loan products. As a result, the disbursement limit of 5% was lifted to 10% of the loan portfolio. The portfolio at risk for the Zero-Grace loans was tracked separately, and the product remained under strict monitoring rules on a continuous basis.