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Microfinance Business Plan

NOV.05, 2023

Microfinance
 Business Plan

Sample Business Plan for Microfinance

Microfinance is a banking service that provides financial assistance to low-income individuals or groups who do not have access to formal financial services. In the US, microfinancing refers to loans of $50,000 or less. Microfinance institutions (MFIs) offer loans, savings, insurance, and other products to help clients improve their livelihoods, reduce their vulnerability, and achieve their goals.

This microfinance business plan template is about a sample microfinance bank that operates in the USA. It will provide an overview of a microfinance bank’s business models, services, customer focus, management team, success factors, financial highlights, and plans. Refer to our financial advisor business plan for a detailed understanding.

Executive Summary

Business overview.

InnoLoan is a microfinance bank that provides affordable and accessible financial services to low-income individuals and small businesses in the USA. Our mission is to empower our customers to improve their livelihoods, create jobs, and contribute to the economic development of their communities.

InnoLoan microfinance bank offers a range of financial products and services to its clients, such as:

  • Microloans – Tailored to the needs and capacities of our customers, with flexible repayment terms and competitive interest rates
  • Savings products – Help our customers build assets and plan for the future
  • Insurance products – Protect our customers from risks and uncertainties
  • Money transfer – Enables our customers to send and receive money conveniently and securely
  • Financial education program – Equips our customers with the skills and knowledge to manage their finances effectively

Customer Focus

Our target market comprises low-income individuals and small businesses excluded or underserved by the formal financial sector. We focus on women, youth, minorities, and rural populations facing multiple barriers to financial services. We segment our customers based on their demographic profile, income level, business activity, and financial needs.

Management Team

We have a strong management team with extensive experience and expertise in microfinance, banking, and social development. Our team is committed to delivering high-quality services to our customers and achieving social and financial impact. We also have a network of well-trained and motivated staff who work closely with our customers at the grassroots level.

Success Factors

Our success factors include:

  • Clear vision and mission
  • Customer-centric approach
  • Diversified product portfolio
  • Robust operational system
  • Strong risk management framework
  • Sound financial performance
  • Positive social impact

Financial Highlights

Our financial highlights for the next five years are:

  • Projected portfolio growth of 25% annually, reaching $50 million by 2026
  • Projected customer base of 100,000 by 2026, with 60% women, 40% youth, 30% minorities, and 70% rural
  • Projected revenue growth of 30% annually, reaching $15 million by 2026
  • Projected net income growth of 35% annually, reaching $3 million by 2026
  • Projected return on equity of 20% by 2026
  • Projected operational self-sufficiency of 120% by 2026

Company Overview

Who is innoloan microfinance bank.

InnoLoan microfinance bank, established in 2020 in San Francisco, CA, is a US-registered and regulated bank that offers affordable and accessible financial services to low-income individuals and small businesses.

InnoLoan Micro Lending Company

InnoLoan micro-lending company, a branch of InnoLoan microfinance bank, gives small US businesses microloans from $500 to $10,000. It supports entrepreneurs with good business ideas or who need more capital.

Industry Analysis

The microfinance industry in the USA is a growing and dynamic sector that provides financial services to millions of low-income individuals and small businesses who are excluded or underserved by the formal financial sector. 

According to the Global Microfinance Market Research Report 2023 , the global Microfinance market reached USD 218.31 billion in 2022. The market is expected to achieve USD 447.76 billion by 2028, exhibiting a CAGR of 12.72% during the forecast period.

Here are some more interesting insights on the microfinance industry:

  • There are approximately 10,000 microfinance institutions throughout the world. ( Fit Small Business )
  • Microfinance institutions worldwide serve more than 140 million borrowers and have a total loan portfolio estimated at $124 billion. ( Microfinance Barometer Report )

Customer Analysis

Demographic profile of target market.

Our target market consists of low-income individuals and small businesses excluded or underserved by the formal financial sector in the USA. We estimate that over 50 million potential customers in this market segment need financial services but lack access to them. We focus on women, youth, minorities, and rural populations facing multiple barriers to financial services.

Customer Segmentation

We segment our customers based on their demographic profile, income level, business activity, and financial needs. The following table shows the characteristics and size of our customer segments:

Competitive Analysis

Direct and indirect competitors.

We face direct and indirect competition from various providers of financial services to low-income individuals and small businesses in the USA. 

Some of the direct competitors include:

  • MicroVest – A microfinance institution with over $50 million in loans to 100,000 customers. It gives microloans from $100 to $10,000 at 18% interest. It also provides 2% interest savings accounts and life and health insurance.
  • MicroFlex – A microfinance institution with over $25 million in loans to 50,000 customers. It gives microloans from $50 to $5,000 at 15% interest. It also provides 1% interest savings accounts and a money transfer service with a 3% fee.

Some of the indirect competitors include:

  • Payday lenders – Providers of short-term loans that charge high-interest rates and fees. They target customers who need urgent cash but have poor credit history or no collateral.
  • Pawn shops – Providers of loans that require customers to pledge their personal belongings as collateral. They charge high-interest rates and fees and may sell the collateral if the customers fail to repay the loans.
  • Credit unions – Non-profit financial cooperatives offering their members loans, savings, and other services. They charge lower interest rates and fees than other providers but have limited outreach and eligibility criteria.

Competitive Advantage

Our competitive advantage is based on the following factors:

Marketing Plan

Our marketing plan is designed to achieve the following objectives:

  • To increase our brand awareness and recognition
  • To attract new customers and retain existing ones
  • To expand our market share and reach by entering new geographic areas
  • To enhance our competitive position and reputation

Our marketing plan consists of the following strategies:

  • Product strategy – We will continuously improve our products based on customer feedback and market research. We will also introduce new products in the future.
  • Price strategy – We will offer competitive and affordable prices that reflect the value and quality of our services. We will also provide incentives and discounts for loyal customers and referrals.
  • Place strategy – We will leverage our existing network of branches, agents, and partners to deliver our services to our customers.
  • Promotion strategy – We will use traditional and digital media to communicate our value proposition and social impact to our target market and stakeholders.

Operations Plan

Operation function.

Our operations plan describes delivering customer services and managing our internal processes. Our operations plan consists of the following functions:

  • Loan origination – We assess and approve microloan applicants using interviews, credit scores, collateral, and group lending, and assist them with the application process.
  • Loan disbursement – We deliver the approved loan amount to our customers via cash, bank, mobile money, or prepaid cards, ensuring speed, ease, and safety.
  • Loan collection – We collect the loan repayments from our customers as per agreement, using direct debit, mobile money, or cash collection, and monitor the loan performance and contact late customers to prevent defaults and losses.
  • Savings mobilization – We offer and manage savings accounts for our customers who want to save money, with good interest rates and no minimum balance, and easy access and withdrawal options through branches, agents, mobile banking, or ATMs.
  • Insurance provision – We offer insurance products that protect our customers from life, health, property, and business risks, working with good insurance companies to provide cheap and customized insurance plans, and handling the claims and payments for our customers in case of loss or damage.
  • Money transfer service – We offer a money transfer service that allows our customers to send and receive money locally and internationally, working with reliable money transfer operators to provide fast and secure money transfer options, and charging low fees and offering good exchange rates.
  • Financial education program – We run a financial education program for our customers who want to learn more, using workshops, seminars, online courses, or mobile apps, and measuring the impact of our program on customers’ financial behavior and well-being.
  • January 2024 – Launch of our microfinance bank with all the necessary licenses, registrations, and approvals
  • June 2024 – Opening of 10 branches in strategic locations across California
  • December 2024 – Reaching 10,000 customers with a loan portfolio of $5 million
  • March 2025 – Introduction of new products such as insurance, money transfer, and financial education
  • June 2025 – Expansion to new states
  • December 2025 – Reaching 50,000 customers with a loan portfolio of $25 million
  • March 2026 – Adoption of digital technologies such as mobile banking, online platforms, and biometric identification
  • December 2026 – Reaching 100,000 customers with a loan portfolio of $50 million

Financial Plan

Our financial plan provides an overview of our key revenue and costs, funding requirements and use of funds, key assumptions, and financial projections. Refer to our bookkeeping business plan here.

Key Revenue & Costs

Our key revenue sources are:

  • Interest income – The income generated from charging interest on our microloans. We charge an average interest rate of 16% per annum on our microloans.
  • Fee income – The income generated from charging fees for our services. We charge an average fee of 2% per transaction on our services.
  • Other income – The income generated from other sources such as grants, donations, investments, etc. We expect to receive an average of $500,000 annually from other sources.

Our key cost drivers are:

  • Operating expenses – The expenses incurred for running our operations, such as salaries, rent, utilities, travel, marketing, etc. Our operating expenses will be 40% of our total revenue.
  • Loan loss provision – The provision made for potential losses due to loan default or delinquency. We estimate that our loan loss provision will be 5% of our total loan portfolio.
  • Capital expenditure – The expenditure for acquiring or upgrading fixed assets such as equipment, software, vehicles, etc. Our capital expenditure will be 10% of our total revenue.

Funding Requirements and Use of Funds

We require a total funding of $10 million to launch and grow our microfinance bank in the next five years. We plan to raise this funding from various sources such as equity, debt, grants, etc. The following table shows the breakdown of our funding sources and amounts:

Key Assumptions

Our financial plan is based on the following key assumptions:

  • Market share – We will capture 0.2% of our target market by 2026 (100,000 customers)
  • Portfolio growth – Our loan portfolio will grow at an annual rate of 25% ($50 million by 2026)
  • Revenue growth – Our revenue will grow at an annual rate of 30% ($15 million by 2026)
  • Net income growth – Our net income will grow at an annual rate of 35% ($3 million by 2026)
  • Return on equity – Our return on equity will be 20% by 2026

Income Statement

Income Statement - Microfinance Business Plan

Balance Sheet

Assets, Liabilities and Equity Position - Microfinance Business Plan

Cash Flow Statement

Cash Flow Statement - Microfinance Business Plan

Hire OGSCapital for Your Microfinance Business Plan

Writing a microfinance business plan is hard and time-consuming. That’s why you should hire us, OGSCapital. We are a team of leading business plan experts, having helped over 5,000 clients attract over $2.7 billion in financing and achieve their business goals. We have a team of experienced and qualified business plan experts and SBA business plan consultants who have worked in various industries and sectors, including microfinance. We know how to create a compelling and customized five-year microfinance business plan that will meet the expectations of your target audience.

We will also provide strategic advice, market research, financial projections, and graphic design to make your micro loan business plan stand out. Contact us for a free consultation and quote for your microfinance business plan template.

Frequently Asked Questions

How much capital is required to start a microfinance company.

In the US, you may need a minimum capital of $5 million to register as a non-banking financial company (NBFC) microfinance institution. You should have a microfinance institution business plan showing your projected income and expenses for the next five years, or refer to our loan officer business plan .

Is the microfinance business profitable?

Microfinance business can be profitable in the US if you deliver high-quality services that meet the needs and preferences of your target market. You can also use digital technologies or a payday loan business plan to manage costs and risks and show your social and financial impact.

How do I start a microfinance business?

To start a microfinance business, you must identify your target market, choose a specialty of finance, create a business plan, and comply with state and federal regulations. You also need a strategic business plan for a microfinance bank that outlines your vision, mission, goals, and strategies.

OGSCapital’s team has assisted thousands of entrepreneurs with top-rate business plan development, consultancy and analysis. They’ve helped thousands of SME owners secure more than $1.5 billion in funding, and they can do the same for you.

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ProfitableVenture

Microfinance Bank Business Plan [Sample Template]

By: Author Tony Martins Ajaero

Home » Business ideas » Financial Service Industry » Bank

Are you about starting a Microfinance bank? If YES, here is a complete sample Microfinance bank business plan template & feasibility report you can use for FREE .

Okay, so we have considered all the requirements for starting a Microfinance bank . We also took it further by analyzing and drafting a sample Microfinance bank marketing plan template backed up by actionable guerrilla marketing ideas for Microfinance banks. So let’s proceed to the business planning section.

Microfinance banks are small banks that offer loans, savings and insurance to entrepreneurs and small business owners who can’t access traditional sources of capital, like banks or investors. The main objective of microfinance banks is to provide people with money to invest in themselves or their business.

Microfinance banks are different from commercial banks. For instance, funding to commercial banks usually take place through public offers (stock markets) in the form of equity, while Microfinance banks usually receive their funding from individuals/private equity holders in the form of debt.

Also most of the services commercial banks offer are bank door services, which mean the customers’ need to go to the banks to avail themselves such financial services. But most of the services provided by Microfinance banks are door step services, which means the staff of the banks deliver their financial services at client’s door step.

Starting a microfinance bank in modern America won’t be an easy task, but nothing they say can stop the success of a determined mind. Below is a well drafted business plan if you want to start Microfinance bank in the Nigeria .

A Sample Microfinance Bank Business Plan Template

1. industry overview.

Microfinance banks provide microloans to individuals and small businesses. These individuals and small businesses tend to go for loans to be able to pay for the purchase of real estate and other transactions. This demand in turn makes the microfinance bank business a recession-proof business.

According to industry reports, the stages of growth and development of a microfinance industry are usually classified into four segments, for ease of analysis. These are the pioneer stage, the breakout stage, the consolidation stage and the maturity stage.

The requirements for the survival of an industry at each of the different stages of development may differ significantly. And so are the nutrients and corrective action in case of challenges.

Report has it that the Nigerian microfinance industry started officially in 2005 (the International Year of Microcredit as declared by the United Nations) with the release by the Central Bank, of the Microfinance Policy Framework for Nigeria. Note that the practice of microfinance or its precursor, microcredit, has been in Nigeria for a much longer time.

It manifested in the activities of moneylenders, regulated under the Moneylenders Act, and other different forms of rural or informal credit market operations. We believe that the high end of it existed in the form of Non-governmental Organizations (NGOs), governed by cooperative rules and regulations.

Industry pioneers were motivated by the need to help in canalizing financial resources, basically in the form of microcredit, to micro-enterprises that constitute over 90 percent of Nigerian business entities. It is believed that 70% of over 170 million Nigerians live below the poverty line. Evidently therefore, there was a lot to do in the area of the fight against poverty, and microfinance was a fitting instrumentality.

2. Executive Summary

Ambassador Microfinance Bank, LLC (AMB LLC) is a new microfinance bank in Asaba, Delta State, that will provide micro lending and mortgage loan services to small businesses, real estate professionals, builders and individual home buyers.

AMB LLC has access to a full range of microfinances and we offer the right loans–with the best rates, terms and costs–to meet our client’s basic needs. We hope to bring high-quality micro lending and mortgage loan services to residential and business customers scattered all over Asaba.

Our plan at AMB LLC is to create a family like platform at our bank, where customers can feel comfortable to analyze the services they want. We also plan to create a unique work environment that is challenging, rewarding, innovative, and respectful of our customers and employee’s needs.

Asaba is a city strategically located on a hill at the western edge of the Niger River, overlooking its sister city, Onitsha, across the Niger Bridge. This beautiful city is the capital of Delta State Nigeria. A fast developing urban area, Asaba has a population of 149,603 as at the 2006 census, and a metropolitan population of over half a million people.

This city was established during the time of the Royal Niger Company (now UACN) and is currently relishing the status of being the administrative capital of Delta state, but due to the fact that Aniocha-Oshimili people maintain the identity of being Igbo, a lot of Igbo from the east of the Niger river invest in Delta state and precisely at Asaba thus improving the economic fortunes of Asaba area and Delta state in general.

The Delta State government also contributes to the economic development of this city by ensuring an economic platform where small businesses can thrive. Also the construction of a multipurpose dam at Ubu River could be useful in generating electricity.

AMB LLC is created as an L.L.C. in order to avoid double taxation found with a corporation yet realizing the benefits of personal liability avoidance. We will be occupying a standard office facility in the business district of the city, giving us the suitable traffic to attract customers.

We have put plans in place to ensure we mould AMB LLC into the very best in the niche we have chosen. We at AMB LLC have also identified several milestones which will act as ambitious yet achievable goals for the business.

By establishing the goals, the need to reach them will develop an implicit incentive for all members to work hard to achieve the milestones. AMB LLC is capitalized by two principal investors, Mr Innocent Udensi and Mrs Martha Asika. Both are well renowned in the micro lending industry with a combined experience of over 25 years in the industry.

3. Our Products and Services

We at AMB LLC plan to offer unique services within the confines of the micro lending and mortgage loan services. We have analysed our industry and have settled for services we can offer our clients effectively. We have also employed a solid workforce with the specific talents to help us offer these services.

We plan to do everything within the proximity of the law to reach our business goals. Our business offering are listed below;

  • Provide loans to small businesses
  • Providing equipment loans
  • Providing vehicle loans
  • Offer residential mortgages
  • Providing mortgage financing online
  • Providing home equity loans online
  • Providing an online mortgage marketplace
  • Offer commercial and industrial mortgages
  • Providing home equity loans
  • Offer residential mortgages loans online
  • Providing other related loan cum mortgage consulting and advisory services

4. Our Mission and Vision Statement

  • Our vision at Ambassador Microfinance Bank is to build a reliable partnership with individuals, small businesses and corporate clients in Asaba Delta State.
  • We plan to provide better services and be regarded better in all of Delta State.
  • Our mission at Ambassador Microfinance Bank is to provide professional, reliable and trusted microloan services that will help individuals, small businesses, corporate organization, and non-profit organizations to reach their desired goals.
  • We plan to build a business that will become one of the leading microfinance banks in all of Delta State.

Our Business Structure

We at AMB LLC understand that micro finance banks operate in the same way other banks and micro lending services firms do. These financial service institutions get people to invest with them and pay them interest, while lending out that money to people who ask for loans and charge interest on those loans.

We have done our research and have decided to improvise or adopt a business process and structure that will guarantee us good return on investment (ROI), efficiency and flexibility. We have explicitly listed the portfolios we plan to fill and work with at AMB LLC.

We believe that these portfolios will be filled with well experienced and learned individuals, who understand and are ready to align with our company’s visions.

We also hope to hire people that are qualified, hardworking, and creative, result driven, customer centric and are ready to work to help us build a prosperous business that will benefit all our stakeholders (the owners, workforce, and customers).

Chief Executive Officer

  • Business consultant

Human Resource and Admin Manager

Sales and Marketing director

Company accountant

  • Loan officers
  • Debt collectors

Receptionist

5. Job Roles and Responsibilities

  • The Chief Executive Officer will be tasked with providing work direction for the business
  • He will be tasked with building, communicating, and implementing the vision, mission, and direction of AMB LLC – which also includes leading the achievement and implementation of all strategies.
  • The Chief Executive Officer is also tasked with fixing prices and signing business deals for the business
  • He is also in charge of employment
  • He also pays workers salary
  • He signs checks and documents for and on behalf of the agency
  • The Chief Executive Officer also evaluates the success of the organization

Business Consultant

  • Will be tasked with providing residential microloans
  • In charge of providing commercial and industrial microloans
  • Will be obligated to provide home equity loans
  • Also provides equipment loans
  • Charged with providing vehicle loans
  • Providing residential mortgages loans online
  • Is also tasked with fixing micro and mortgage financing online
  • The business consultant is also charged with fixing home equity loans online
  • Provides an online micro and mortgage marketplace for the company
  • Also in charge of providing mortgage related loan cum lending consultancy
  • Oversees the running of HR and administrative tasks for AMB LLC
  • Tasked with Monitoring office supplies by checking stocks; placing and expediting orders; evaluating new products.
  • Makes sure of the operation of equipment by completing preventive maintenance requirements; calling for repairs.
  • Tasked with stating job positions for recruitment and managing interviewing process
  • In charge of organizing induction for new team members
  • Tasked with organizing trainings, evaluation and assessment of employees
  • In charge of arranging travel, meetings and appointments
  • Tasked with overseeing the smooth running of the daily office activities.
  • In charge of organizing external research and coordinating all the internal sources of information to retain the organizations’ best customers and attract new ones
  • Expected to understand, prioritizes, and reaches out to new partners, and business opportunities et al
  • The sales and marketing director is also charged with creating, executing and evaluating new plans for expanding sales
  • Keeps all customer contact and information
  • Represents the company in strategic meetings
  • Aid to increase sales and growth for the business
  • The company accountant is in charge of preparing financial reports, budgets, and financial statement
  • Also provides the managements with financial analyses, development budgets, and accounting reports
  • The company accountant is also tasked with the company’s financial forecasting and risks analysis.
  • Should be able to understand and take care of the firm’s cash management, general ledger accounting, and financial reporting
  • Tasked with developing and managing financial systems and policies
  • The company secretary is also responsible of administering payrolls
  • Ensures that AMB LLC complies with taxation legislation
  • Also take care of all financial transactions for AMB LLC
  • Is the internal auditor for the organization

Loan Officer

  • Communicating to customers why their loan was either approved or denied and providing evidence to back up those determinations.
  • Keeping loan documents and conversations private in order to maintain customer confidence.
  • Staying up-to-date with any changes in the industry by furthering your knowledge of the business through educational opportunities, participating in business-related seminars, and professional networking.
  • Responding promptly to phone calls and emails from customers about their loan or loan application process.
  • Meeting with individuals and businesses in order to accurately analyze their credit, financial status and any property they have.
  • Being able to handle any customer complaints and questions about the loan process and having the ability to fix any lingering issues related to their particular loan.
  • Advising customers and helping them accrue the various copies of individual and business-related financial documents, credit histories and whichever other financial documents are required in order to fulfill the loan requirements.
  • Providing loan applicants with the various types of credit options available and the terms related to those options.
  • Explaining to potential customers the viability of certain loans in relation to an individuals or businesses financial standing.
  • Denying or approving loans based on the specific financial limits of the individual or business and being able to offer alternatives when necessary.
  • Being able to adequately resolve any snags in the mortgage application process.
  • Submitting any and all paperwork related to the loan to credit analysts in order to make sure that loan applicants can get their documents verified and therefore recommended towards the right type of loan for them.
  • Figuring out the different payment scheduling options available to customers, as well as helping to review and update any loan or credit files.
  • Operating with class and adhering to all laws, regulations, and compliance guidelines.

Debt Collector

  • Keep track of assigned accounts to identify outstanding debts
  • Plan course of action to recover outstanding payments
  • Locate and contact debtors to inquire of their payment status
  • Negotiate payoff deadlines or payment plans
  • Handle questions or complaints
  • Investigate and resolve discrepancies
  • Create trust relationships with debtors when possible to avoid future issues
  • Alert superiors of debtors unwilling or unable to pay when necessary
  • Comply with requirements when legal action is unavoidable
  • The receptionist is expected to welcome clients by greeting them in person or on the telephone; answering or directing inquiries.
  • Is tasked with providing all clients with a personalized customer service experience of the highest level
  • Is expected to use every opportunity to build client’s interest in the company’s products and services
  • Be aware of any new information on the company’s products, promotional campaigns etc. to ensure accurate and helpful information is supplied to clients
  • The receptionist will also receive parcels / documents for the company
  • It’s tagged with distributing mails in the organization
  • Handles any other duties as assigned by the Admin manager
  • In charge of the cleaning the floors of AMB LLC facility
  • Keep note and make sure the toiletries and supplies don’t run out of stock
  • Ensures that both the interior and exterior of the firm are always clean
  • Handles any other duty as assigned by the restaurant manager.

Security guard

  • The security guard is in charge of protecting the firm and it’s environs
  • Also controls traffic and organize parking
  • Should also patrol around the building on a 24 hours basis
  • It’s expected to give security reports weekly

6. SWOT Analysis

Our plan as a microfinance bank is to establish well– structured microloan services that will be of good help to our clients. That is why we contacted an experienced consultancy firm, a firm known for its precise way of doing business and also renowned for offering the best.

We employed the services of Jefferson consults to help us conduct a SWOT Analysis in our designated business location. Below is a summary from the result of the SWOT analysis that was conducted for AMB LLC;

According to our SWOT analysis, our strength at AMB LLC rests on the capacity, vision and experience of our team. We can boast of having a team that is prepared to offer our clients the very best; a team that is well placed, professional and ready to pay attention to details and to maximize financial profits for the business.

According to our SWOT analysis conducted by Jefferson Consults, our weakness at AMB LLC will be the time it will take us to break into the market and gain acceptance since we are just a new microfinance bank. But we have designed a marketing plan that will take us through that stage as quickly as possible.

  • Opportunities

We at AMB LLC understand the enormous opportunities in the lending industry, especially judging by the number of people, business startups and corporate organizations who are all in need of microloans to help them reach their individual goals and vision.

AMB LLC being a standard and well positioned Microfinance bank is well prepared to offer microloan and mortgage loan services to see to the needs of this growing target audience.

Jefferson Consults in the SWOT analysis conducted for AMB LLC noted that our threat in this business will include unfavourable government policies, the introduction of a competitor within our location of operation and global economic downturn which usually affects purchasing / spending power.

They went further to advise us at AMB LLC to be aware of huge losses in three situations: due to sharp, sustained increases in interest rates, accounting control fraud, or the collapse of hyper-inflated residential real estate bubbles. That is why to mitigate these threats, we have introduced the use of credit scoring software and we have created counter plans for each possible threat.

7. MARKET ANALYSIS

  • Market Trend

We at AMB LLC understand that the formal introduction of a national policy on microfinance would change a lot of things in the industry. It will legitimize the illegal operators; and encourage the inflow of capital funds to the sector. That is why some of the pioneer institutions in the industry have transferred their already public positive attributes to become industry leaders.

LAPO microfinance is still the number one player in this field creating wealth and blazing the trail. We at AMB LLC believe that policy objective at the pioneer stage of the industry should centre on the promotion of stability and confidence.

Regulation should be strict and transparent or at least evoke the image of transparency, while intervention is swift, all in a bid to win popular confidence of stakeholders.

Experts in the industry expect a huge expansion in the number of participants. This is strategically driven by the level of success achieved by the pioneers. Being a monopolistically competitive market, the fairly easily achievable conditions for entry (licensing) enable profit-seekers to come and compete for the presumed profit available in the sector.

According to statistics, Nigeria now has over one thousand microfinance banks and several providers organised as NGOs. This is a clear indicator that the industry in Nigeria is attractive to investors who are willingly staking their capital.

8. Our Target Market

Our first aim at AMB LLC is to serve small to medium sized business, from new ventures to other bigger businesses and individual clients.

We plan to be decisive in all steps and approach our market one step at a time. We at AMB LLC plan to offer the best possible microloan services, hence we’ve made sure all our employees are well trained and equipped to serve a diverse range of clientele base.

Our target audience at AMB LLC will cut across businesses of different sizes and individuals. Outlined below is the list of businesses and organizations that we have categorically designed our products and services for;

  • Small businesses
  • Individuals and interested home owners
  • Real Estate companies and investors
  • Non-governmental organizations
  • House of worships and other religious organizations
  • Educational institutions
  • Corporate companies

Our competitive advantage

We at AMB LLC understand that the level of competition in the microfinance banking industry does not in any way depend on the location of the business since most micro finance banks and other microloan businesses can operate online and from any part of the world and still effectively compete in the industry.

We have made plans to ensure we penetrate the market and offer our customers what they really want – easy access to microloans; thereby deleting the hard and long process needed to obtain loans from the bank and other financial institutions.

Another advantage we have in this industry is the quality and experience of our workforce. The owners, down to every employee at AMB LLC, are all well trained to function well in the microfinance industry.

We have also, through the help of Jefferson Consult, established a comfortable business environment for our employees by offering work bonus and loyalty bonus which will be calculated with more or less 10 years duration. This we believe will push our employees to give their all and stay loyal to the business and also help build a classic competitive microfinance bank.

9. SALES AND MARKETING STRATEGY

  • Sources of Income

AMB LLC was established to serve a specific need in the industry and to also generate substantial revenue. Although our goal at AMB LLC is customer satisfaction in the microloan business, but as a business, we want to make profits and grow our enterprise.

We plan to generate income by offering the following microloan services to individuals, real estate companies, NGOs and corporate organization. We plan to maximize profits by offering the following services;

  • Provide equipment loans
  • Provide vehicle loans
  • Provide mortgage financing online
  • Provide home equity loans online
  • Provide an online mortgage marketplace
  • Provide home equity loans
  • Provide other related loan cum mortgage consulting and advisory services

10. Sales Forecast

Our sales forecast at AMB LLC was conducted in a conservative fashion to avoid any inflated expectations that might not be obtainable. We acknowledge that the first few months of business will be slow. AMB LLC has projected steady, incremental growth in sales.

This can be explained as a function of the increased proficiency in terms of sales for AMB LLC services as well as the growing awareness of AMB LLC by the target customers.

Reviewed below is a detailed sales forecast for AMB LLC, which we believe and hope we will surpass with hard work and perseverance. This sales forecast is also based on the location of our business and the innovative business we will be offering to our clients.

  • First Fiscal Year: N1, 650,000
  • Second Fiscal Year: N2, 590,000
  • Third Fiscal Year: N4, 328,000
  • Marketing Strategy and Sales Strategy

Our marketing effort at AMB LLC will focus on our ability to empower people to make a substantial difference in their world while getting a great return on their money. We plan to make use of magazine advertisements and community based marketing (networking, sponsorship and participation in seminars) to grow our business visibility.

We plan to make our advertisements steady so that people will become aware of the investment options we offer at our bank. We will participate in numerous on-topic events and seminars that will display AMB LLC as experts as well as give us a podium to describe our different services. We hope to make use of the listed strategies to build our business;

  • We plan to introduce AMB LLC by sending introductory letters with our business brochure to individuals, households, corporate organizations, schools, players in the real estate sector etc
  • We also plan to advertise AMB LLC in important financial and business related magazines, newspapers, TV and radio stations
  • We also plan to attend important international and local real estate , finance and business expos, seminars, and business fairs et al
  • We also hope to create different packages for different category of clients (individuals, startups and established corporate organizations) in order to work with their budgets
  • We also plan to make use the internet to promote our business
  • We hope to encourage word of mouth marketing from loyal and satisfied clients

11. Publicity and Advertising Strategy

In order to achieve our publicity and awareness goals, we at AMB LLC have contacted the services of Stella Maris Advertising Experts, a renowned venture in business development and publicity, to help us create publicity and advertising strategies that will help us at AMB LLC to attract and keep our target audience interested. Listed below is the summary of capable strategies suggested by Stella Maris Advertising Experts for AMB LLC;

  • Place adverts on both print (community based newspapers and magazines) and electronic media platforms; we will also advertise AMB LLC on financial magazines, real estate and other relevant financial programs on radio and TV
  • Sponsor relevant community based events
  • Leverage various online platforms to promote the business. This will make it easier for people to enter our website with just a click of the mouse. We will take advantage of the internet and social media platforms such as; Instagram, Facebook , twitter, YouTube, Google + et al to promote our brand
  • Place our billboards in strategic locations all around Asaba – Delta State.
  • Share and distribute our fliers and handbills in target areas all around Asaba
  • Ensure that all our workers wear our branded shirts and all our official vehicles are branded with our company’s logo.

12. Our Pricing Strategy

It’s very important to state that the microfinance industry is moved by the increase in demand and availability of real estate / properties. That is why there can never be a price model that will be suitable for the general lending industry. Indeed the prices for properties and human needs fluctuate on a regular basis.

We at AMB LLC also understand that most lending firms rely on commissions since they serve as middlemen between those seeking for microloans and the secondary financiers. But we hope to establish a more direct approach by offering those loans ourselves which can be very possible due to the large incentives our founders are willing to inject.

Our plan is to keep the prices of our services and commissions below the average market rate for our clients for the main time.

We also hope to provide them with loans coupled with low interest rates that will bring them closer to the bank, and we hope to move our prices a little higher when we have achieved a substantial corporate identity in the microfinance business.

  • Payment Options

We at AMB LLC have concluded plans to provide a wide variety of payment options for our clients. We understand the need and the diverse countenances of people, and we plan to provide a suitable platform that will suit all equally. We have chosen a well renowned bank in the Nigeria to help make payment easier for our clients.

We have chosen and opened a corporate current account with Capital one financial Corporation. Our bank account numbers will be made available in website and promotional materials to clients who may want to make cash deposit and it will also be given to clients on request. Listed below are the payment options that we will make available to AMB LLC.

  • Payment through bank transfer
  • Payment through online bank transfer
  • Payment with check
  • Payment with bank draft
  • Cash payment to debt collectors

13. Startup Expenditure (Budget)

The need for funds can’t be overlooked in the type of services we plan to offer at AMB LLC. We understand that we need funds to put together a competitive business, especially in Nigeria. We need funds to get a phone system, workstation computers, back end server, DSL Internet connection, and laser printer.

Funds are needed to get office furniture, meeting room and waiting room furniture; to settle monthly service charge for KDB software, purchase a Fax machine, copier, lighting, and assorted office supplies. We have analyzed our needs and we plan to spend our startup funds judiciously. Outlined below is a detailed financial projection and costing for starting AMB LLC;

  • Price of incorporating the Business in the Nigeria of America – N15,000.
  • Our budget for basic insurance policy covers, permits and business license – N200,000
  • Acquiring a suitable Office facility opposite the city hall at Asaba Delta State (Re – Construction of the facility inclusive) – N175,000
  • The budget envisaged for capitalization (working capital) – N20 million
  • Budget for settling other legal processes (acquiring business license and all city dues et al) – N20,500
  • Equipping the office with suitable and standard equipment(computers, software applications, printers, fax machines, furniture, telephones, filing cabins, safety gadgets and electronics et al) – N110,000
  • Purchasing of the required software applications (CRM software, Accounting and Bookkeeping software and Payroll software et al) – N10,500
  • Launching AMB LLC official Website – N16,000
  • Our expenditure for paying at least three employees for 3 months plus utility bills – N120, 000
  • Other Additional Expenditure (Business cards, Signage, Adverts and Promotions et al) – N40,000
  • Miscellaneous: N80,000

With the above detailed cost analysis , we need N5m and N20 million working capital to successfully set up AMB LLC.

Note-: This cost is rather on the low-end as we didn’t factor in the cost of obtaining CBN license for a Microfinance bank, which can either be N20million or N100million or N1billion ; depending on the size and operational style of your Microfinance bank.

  • Generating Startup Capital for AMB LLC

AMB LLC is a licensed and registered Microfinance bank which is capitalized by two principal investors, Mr Innocent Udensi and Mr Martha Asika.

Our founders plan to become the very first financiers of the business, although we have plans of accepting partners at a very ripe and mature stage in the business. Due to less constraint in financing AMB Mortgages, we have outlined the few ways we can acknowledge funding and startup capital. These ways may include;

  • Generate part of the startup capital from the two principal investors
  • Accept soft loans from family members and friends
  • Agreeing to angel investors
  • Apply for business loan from the bank (if need be)

Note : AMB LLC has been able to generate an enormous N5 million from its two principal investors, who aligned and individually dished out N2,500,000 each. We have also aligned with an angel investor to inject N20 million into AMB LLC, with the hope of making profits and establishing a solid business.

14. Sustainability and Expansion Strategy

It is the goal of every business venture to grow and remain consistent in making profits and acquiring customers. The baseline of every business lies in the number of loyal customers in their clientele base and the competence of their employees, investment procedures and the business structure they choose. We at AMB LLC understand our market and we have established plans that will carry us thus far.

We believe with our unique business structure and competent hands will be able to help us make the right decisions and start making profits from our forts year in business. We also understand that one of the strategies of gaining approval and winning customers over is to offer innovative services to our customers at a more affordable rate than what is obtainable in the industry.

We have also made sure that we established the right platform, structures and processes. We plan to make sure all our employees are well catered for and presented with an environment that will help them stay innovative and current. AMB LLC will be run and managed like a family with excellent values and ethics.

We have also put together a profit-sharing arrangement which will enable our management staff enjoy the fruit of their labour.

This arrangement will be decided upon during a considerable duration of 5 years and upon decision of the board of the organization. With these and many more attractive employees focused incentives, we hope to hire and retain employees that are the best in any field they are hired for.

Check List/Milestone

  • Business Name Availability Check:>Completed
  • Business Incorporation: Completed
  • Opening of Corporate Bank Accounts: Completed
  • Opening Online Payment Platforms: Completed
  • Application and Obtaining Tax Payer’s ID: In Progress
  • Application for business license and permit: Completed
  • Purchase of Insurance for the Business: Completed
  • Conducting feasibility studies: Completed
  • Leasing, renovating and equipping our facility: Completed
  • Generating part of the startup capital from the founder: Completed
  • Applications for Loan from our Bankers: In Progress
  • Writing of Business Plan: Completed
  • Drafting of Employee’s Handbook: Completed
  • Drafting of Contract Documents: In Progress
  • Design of The Company’s Logo: Completed
  • Printing of Promotional Materials: Completed
  • Recruitment of employees: In Progress
  • Purchase of the Needed software applications, furniture, office equipment, electronic appliances and facility facelift: In progress
  • Creating Official Website for the Company: In Progress
  • Creating Awareness for the business (Business PR): In Progress
  • Health and Safety and Fire Safety Arrangement: In Progress
  • Establishing business relationship with banks, financial lending institutions, vendors and key players in the industry: In Progress

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How to Start a Microlending Company

Microlending is the practice of lending smaller sums of money, typically to those who are unable to obtain funding through an established federal institution. Microlenders typically don’t request any type of collateral before loaning out the money. For-profit institutions may charge a high rate of interest to mitigate financial risks should the borrower default on their loans.

Microlending has had a lot of traction overseas in developing nations, and most are non-profit ventures. Money is lent to people who need it to start a small business in their area. Would-be entrepreneurs can get the cash they need to fill a vital need in the community, and lenders can contribute in their own way to helping individuals find their niche and lead more productive lives.

Learn how to start your own Microlending Company and whether it is the right fit for you.

Ready to form your LLC? Check out the Top LLC Formation Services .

Microlending Company Image

Start a microlending company by following these 10 steps:

  • Plan your Microlending Company
  • Form your Microlending Company into a Legal Entity
  • Register your Microlending Company for Taxes
  • Open a Business Bank Account & Credit Card
  • Set up Accounting for your Microlending Company
  • Get the Necessary Permits & Licenses for your Microlending Company
  • Get Microlending Company Insurance
  • Define your Microlending Company Brand
  • Create your Microlending Company Website
  • Set up your Business Phone System

We have put together this simple guide to starting your microlending company. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

Exploring your options? Check out other small business ideas .

STEP 1: Plan your business

A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:

What will you name your business?

  • What are the startup and ongoing costs?
  • Who is your target market?

How much can you charge customers?

Luckily we have done a lot of this research for you.

Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Microlending Company Name Generator

If you operate a sole proprietorship , you might want to operate under a business name other than your own name. Visit our DBA guide to learn more.

When registering a business name , we recommend researching your business name by checking:

  • Your state's business records
  • Federal and state trademark records
  • Social media platforms
  • Web domain availability .

It's very important to secure your domain name before someone else does.

Want some help naming your microlending company?

Business name generator, what are the costs involved in opening a microlending company.

Microlenders typically don’t have a lot of overhead, though you’ll likely need to hire a loan processor, a collector, and a bookkeeper. If you plan to take on all of these roles on your own at the beginning, you'll need to be extra careful. Even one mistake on your part can land you in legal hot water.

What are the ongoing expenses for a microlending company?

Overhead for a microlender is low, as you generally don’t need an office to conduct business:

  • Employee salaries
  • Advertising costs
  • General office supplies
  • Website costs

Who is the target market?

If you're hoping to make a social contribution as much as an economic one, an ideal person to lend a small sum of money to may be a woman in a third-world country, for example. She may be smart and capable of running a small family farm, but she lacks the resources to get started. A small sum of money may buy her enough for a few animals, which she can then raise to provide for her family. She may use the milk from goats or eggs from chickens to both nourish her family and sell to others in her community.

If you're hoping to make money on your loan, you may want to consider lending to young go-getters who lack the credit history they need to get a conventional loan. There are a number of reasons why people may need a small amount of money, so do your research first before you decide which areas need your assistance the most.

How does a microlending company make money?

Microlenders make money by charging people interest on their loans. You may lend out $500 at a 20% interest rate, meaning the debtor will owe $600 by the time all is said and done.

Interest rates vary widely from place to place. Some may charge 10% while others charge up to 80%. The average is about 35%, but you’ll want to do research on the interest rates in any given area. Some well-known non-profit microlending websites don't even offer the option of interest, while others may go as low as 3%. In these cases, it's more like charity than a business venture though. Those who charge extremely high interest rates are usually for-profit businesses.

How much profit can a microlending company make?

With persistence and patience, a microlender can make a considerable amount of money when in the right area. Some studies state that up to 97% of low-income borrowers pay back their loan under the agreed-upon terms. If you make $100 on average on each loan, you’ll need to make 600 loans in a year to make $60,000.

How can you make your business more profitable?

You may wish to expand to other parts of the world to make your business more profitable. Or you could consider opening up a payday loan store in your neighborhood if you feel you have a good handle on microlending and want to serve others who may need financial assistance.

Want a more guided approach? Access TRUiC's free Small Business Startup Guide - a step-by-step course for turning your business idea into reality. Get started today!

STEP 2: Form a legal entity

The most common business structure types are the sole proprietorship , partnership , limited liability company (LLC) , and corporation .

Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your microlending company is sued.

Form Your LLC

Read our Guide to Form Your Own LLC

Have a Professional Service Form your LLC for You

Two such reliable services:

You can form an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.

Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services . You can choose to hire a registered agent or act as your own.

STEP 3: Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

In order to register for taxes you will need to apply for an EIN. It's really easy and free!

You can acquire your EIN through the IRS website . If you would like to learn more about EINs, read our article, What is an EIN?

There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.

STEP 4: Open a business bank account & credit card

Using dedicated business banking and credit accounts is essential for personal asset protection.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil .

Open a business bank account

Besides being a requirement when applying for business loans, opening a business bank account:

  • Separates your personal assets from your company's assets, which is necessary for personal asset protection.
  • Makes accounting and tax filing easier.

Recommended: Read our Best Banks for Small Business review to find the best national bank or credit union.

Get a business credit card

Getting a business credit card helps you:

  • Separate personal and business expenses by putting your business' expenses all in one place.
  • Build your company's credit history , which can be useful to raise money later on.

Recommended: Apply for an easy approval business credit card from BILL and build your business credit quickly.

STEP 5: Set up business accounting

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

Make LLC accounting easy with our LLC Expenses Cheat Sheet.

STEP 6: Obtain necessary permits and licenses

Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.

State & Local Business Licensing Requirements

Certain state permits and licenses may be needed to operate a microlending business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits .

Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses .

Certificate of Occupancy

Businesses operating out of a physical location typically require a Certificate of Occupancy (CO).  A CO confirms that all building codes, zoning laws, and government regulations have been met.

  • If you plan to lease a microlending office location :
  • It is generally the landlord’s responsibility to obtain a CO.
  • Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a microlending business.
  • After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
  • If you plan to purchase or build a microlending office location :
  • You will be responsible for obtaining a valid CO from a local government authority.
  • Review all building codes and zoning requirements for your business’ location to ensure your microlending business will be in compliance and able to obtain a CO.

STEP 7: Get business insurance

Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.

There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance . This is the most common coverage that small businesses need, so it’s a great place to start for your business.

Another notable insurance policy that many businesses need is Workers’ Compensation Insurance . If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.

FInd out what types of insurance your Microlending Company needs and how much it will cost you by reading our guide Business Insurance for Microlending Company.

STEP 8: Define your brand

Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.

If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners , we'll give you helpful tips and advice for creating the best unique logo for your business.

Recommended : Get a logo using Truic's free logo Generator no email or sign up required, or use a Premium Logo Maker .

If you already have a logo, you can also add it to a QR code with our Free QR Code Generator . Choose from 13 QR code types to create a code for your business cards and publications, or to help spread awareness for your new website.

How to promote & market a microlending company

The best way to promote and market your business is to understand the need you’re filling in any given area. For example, if you’re only targeting small family farmers, then you need to determine how they learn about financial opportunities in their area. This may include physical advertising, such as flyers, or online advertising on specific websites. Depending on your goals, it may even include going door to door.

You should also have your own website that describes what you do, and how you do it. Consider having your information in several languages for the best results, and hiring an interpreter for better communication.

How to keep customers coming back

The best way to generate customers is to be as fair a lender as possible. This doesn’t mean letting people get away with constantly missing payments, but it does mean trying to work with your clients whenever possible. Always do what you say you're going to do, and ensure excellent customer service and professional behavior at all times.

STEP 9: Create your business website

After defining your brand and creating your logo the next step is to create a website for your business .

While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.

Here are the main reasons why you shouldn’t delay building your website:

  • All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
  • Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
  • Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.

Recommended : Get started today using our recommended website builder or check out our review of the Best Website Builders .

Other popular website builders are: WordPress , WIX , Weebly , Squarespace , and Shopify .

STEP 10: Set up your business phone system

Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.

There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use. Check out our review of the Best Business Phone Systems 2023 to find the best phone service for your small business.

Recommended Business Phone Service: Phone.com

Phone.com is our top choice for small business phone numbers because of all the features it offers for small businesses and it's fair pricing.

TRUiC's Startup Podcast

Welcome to the Startup Savant podcast , where we interview real startup founders at every stage of the entrepreneurial journey, from launch to scale.

Is this Business Right For You?

This business is excellent for those who understand the power of responsible lending. This isn't charity, but it is giving someone else a helping hand when they need it the most. The successful microlender will need an excellent balance between helping others and remaining financially solvent.

Want to know if you are cut out to be an entrepreneur?

Take our Entrepreneurship Quiz to find out!

Entrepreneurship Quiz

What happens during a typical day at a microlending company?

Microlenders must do a number of things to prepare to lend money:

  • Research target client/demographic
  • Screen clients
  • Create reasonable billing plans for pay back
  • Comply with all state/federal laws for financial lending
  • Study lending practices in different areas.

What are some skills and experiences that will help you build a successful microlending company?

Having some type of formal education in how finances work around the world will help, as will an in-depth knowledge of current law for both the country you operate out of and the country of those you’ll be lending to.

What is the growth potential for a microlending company?

Microlending has done well in Latin American countries and third-world nations because there are a limited amount of ways to obtain conventional funding. If you wish to open a for-profit business, you may want to concentrate on these areas as opposed to lending within the US.

TRUiC's YouTube Channel

For fun informative videos about starting a business visit the TRUiC YouTube Channel or subscribe to view later.

Take the Next Step

Find a business mentor.

One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.

Having a support network in place to turn to during tough times is a major factor of success for new business owners.

Learn from other business owners

Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.

Resources to Help Women in Business

There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:

If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.

What are some insider tips for jump starting a microlending company?

The best thing you can do is learn how to screen your clients, and to create detailed contracts about each loan. You will get a lot of applications from hard-working, responsible people who will do everything possible to use the funds wisely and pay you back. However, you will get a certain amount of people who are out to take your money, or who are asking for the money to achieve an unattainable goal. Consider video chat or in-person meetings as a way of getting to know your clients. Ask them about their business plan, and look to see how much effort went into their model.

You also need to keep meticulous records to ensure you’re never in danger of violating the laws. Start with sketching out a business plan that details how each transaction will work, and how everything will be recorded. Owners also need to have enough capital to start the business. Even with a limited amount of clients at the beginning, all of your loans will add up quickly.

How and when to build a team

Those familiar with the microlending business say to hire people right away because the risks of making a mistake can be high. However, if you’re starting small with just a few clients or you don’t have very much capital, you may be able to get everything started without external help.

Useful Links

Industry opportunities.

  • A Brief History of Microlending

Real World Examples

  • American Microloan
  • Microfinance

Have a Question? Leave a Comment!

How to Start Up a Microfinance Company

by Andra Picincu

Published on 12 Dec 2019

Traditionally, microfinance companies provided small loans and other services to individuals who were unemployed or had limited resources. Over the past years, these services become popular among entrepreneurs that may not qualify for traditional bank loans and need money to pay their bills or cover ongoing expenses. If you have in-depth knowledge of the financial sector, you may start a microfinance business. This will allow you to help those in need and make a difference in your community.

From credit unions and microfinance banks to non-governmental organizations, microfinance institutions come in all shapes and sizes. Before getting started, choose a business model that aligns with your goals and define your audience. Consider offering specific types of financial products and services, such as microloans for startups.

Overview of the Microfinance Market

Nearly 140 million borrowers worldwide received funding from microfinance companies in 2018. Rural borrowers accounted for about 65% of that number, reports the Microfinance Barometer. Currently, more than 10,000 companies operate in this market. Yet, the industry is still misunderstood or poorly perceived by the general public.

Microfinance institutions have anywhere from 100 to six million clients and may include micro-finance banks, savings and credit cooperatives, non-governmental organizations and other legal entities. Their services appeal to marginalized populations and low-income individuals. Many of these companies also offer financial training and programs aimed at reducing poverty rates. Some receive funding from major commercial banks.

The microfinance market has a 9% annual global growth rate , which is significantly higher compared to other industries. Digital technologies, such as blockchain and social media, as well as the globalization of microenterprises, have contributed to this growth. A growing number of microfinance companies are using Internet-based strategies to expand their reach, launch new products and improve the customer experience. Although the cost of providing credit remains high, the rising popularity of microlending is having positive financial and welfare impacts for low-income individuals in developing countries.

Research the Latest Industry Trends

Market analysis is paramount for any entrepreneur planning to start a microfinance business. This industry is constantly evolving, which is why you need to keep up with the latest trends and adapt to the ever-changing environment. As mentioned earlier, microfinance companies are no longer targeting only the poor . Many of these organizations are shifting to individual lending instead of group lending, offering a variety of loans to finance education, health, housing and small businesses.

The types of financial services provided by microlending companies are more diverse than ever before; insurance products, money transfers and savings accounts are just a few examples. Additionally, customers have access to longer-term loans with flexible repayment rates. Financial experts estimate that a growing number of salaried workers will apply for microloans over the next years. Also, it's important to note that many microfinance institutions are now financing small- and medium-sized businesses, not just low-income individuals.

Increasingly, more non-profit microfinance companies are embracing these trends to gain market share and expand their reach. Many of them have turned into profit-seeking institutions. As an entrepreneur, you need to consider these aspects so you can choose a sustainable business model. Furthermore, you must be open to innovation and digital transformation in order to build a successful venture.

Microfinance Business Models

Before you make a business plan, research the different types of microfinance companies . Do you plan to start a microfinance bank, a credit union or a cooperative? Another option is to set up a non-governmental organization that offers microloans and other financial products to entrepreneurs, low-income families and so on. Each business model has different legal implications.

A microfinance bank, for example, involves higher costs and requires more paperwork than a credit union. In addition to a general business license, you may need a banking license and one for trust and powers (if you wish to offer trust department services or other fiduciary services). The legal requirements are slightly different for credit unions. The state of Florida, for instance, requires them to have a National Credit Union Share Insurance Fund (NCUSIF) insurance policy besides business licenses and permits.

Starting this kind of business comes with its challenges, but you can mitigate the risks by hiring an attorney. He or she will tell you what documents are needed to achieve legal compliances and avoid hefty fines. Depending on the state, you may need a microlending license, consulting contract documents, non-disclosure agreements, deposit insurance, credit insurance, risk insurance, payment protection insurance and more. These requirements vary among states, so your best bet is to consult an experienced law firm .

Draft a Microfinance Business Plan

With more than 10,000 microfinance institutions, the competition can be tough in this industry. Therefore, you need a solid business plan and a well-thought-out marketing strategy. Analyze the market, define your target audience and assess your startup costs before getting started and then put everything in writing. Your microfinance business plan should cover the following aspects:

  • Overview of the microfinance market, key industry players and trends
  • Market and competitive analysis
  • Company description
  • Financial products and services
  • Mission and goals
  • Strategy and implementation
  • Potential opportunities and threats
  • Regulatory policies
  • Minimum capital requirements
  • Sources of income
  • Financial projections
  • Sales and marketing strategy
  • Pricing strategy
  • Payment options

Determine what products and services you want to offer. Unlike microcredit companies, which only offer small loans, microfinance institutions typically provide a wide range of financial products, such as savings and pension plans, money transfers and insurance policies. To put it simply, microcredit is an integral component of microfinance.

Your business plan should clearly define your target audience . Decide whether you want to focus on small business owners and entrepreneurs, educational institutions, non-profit organizations or low-income borrowers in general. Use this information to develop a sales and marketing plan. Determine where you'll get the money needed to start your business, such as your savings, family funds, investors or bank loans. To increase your chances of success, you may specialize in particular products or services , such as:

  • Microloans for startups
  • Equipment and vehicle loans
  • Home equity loans
  • Commercial mortgages
  • Residential mortgages
  • Financial consulting

Register Your Business

The best legal entity to use for a microfinance business is either a limited liability company (LLC) or a general partnership . An LLC separates your personal assets from your business assets and involves less paperwork than a corporation. Additionally, it provides more flexibility and doesn't require a board of directors and other formalities.

Once you've made a decision, register your company with the state and apply for a tax ID number. Simply head over to the IRS website and fill out an application form to obtain your EIN (employer identification number). Next, open a business bank account and apply for loans or grants if you need startup capital.

Depending on your location and the type of legal entity, you may need specific licenses and permits . For example, a zoning permit may be required in certain states if you rent or purchase commercial space for your business. Again, it's recommended to reach out to an attorney. The financial industry is tightly regulated and the fines can be hefty, so don't take unnecessary risks.

Develop a Marketing Strategy

Consider your target audience as well as your products and services when drafting a marketing plan. If you're targeting local consumers, advertise your services on the TV, radio and in local newspapers. You may also send brochures and introductory letters to small businesses, schools, households and other prospective clients. Attend local business and finance events, seminars, workshops and conferences to connect with other industry professionals and grow your network.

Depending on your budget, you can also give away branded merchandise, place billboards around the city, distribute flyers or sponsor local events, such as fundraising campaigns. Another way to promote your microfinance business is to set up online advertising campaigns on Google and Facebook. In this case, it would worth hiring a marketing agency. They can leverage Facebook’s algorithm to laser-target your audience and create highly personalized ads.

Furthermore, join your local chamber of commerce to market your services and get referrals. Consider creating different packages for each type of customer. A microloan for female entrepreneurs, for example, may have different payment terms and interest rates than one for low-income households. Likewise, your online marketing efforts should be tailored to each type of client.

microfinance company business plan

Writing a Business Plan For Microfinance Institutions

Why a business plan for mfis are important.

As more microfinance institutions strive for financial self-sufficiency, they recognise the importance of taking a business approach, being more responsive to their client’s needs, and constantly improving their management and operations. With this business approach comes the need for MFls to think about their products, markets, and operations, and to develop a plan to meet their future goals.

Many microfinance institutions underestimate the importance of planning and how a proper business plan may help an MFI get started, attract funds, plan for the future, and track its success. This initiative aimed to get microfinance institutions thinking about where they’ve been, where they want to go, and how they’re going to get there.

Microcredit, also known as microlending, is a method of financing in which small loans are issued by individuals rather than banks or other credit organisations. Entrepreneurs and company owners may utilise these loans to get their concept off the ground or to expand their firm with a little more cash. In that regard, microlending is similar to a small business loan.

Microfinance has always been important in poverty alleviation. It provides them a helping hand, empowering them to earn their way out of poverty. However, the importance of microfinance in COVID-19 recovery efforts cannot be overstated. The existing microfinance infrastructure and technology will be critical in keeping people linked to key services during the pandemic and its recovery.

The motivation behind the loan is what distinguishes microlending. Traditional lenders may charge interest or fees to make a profit on their loans. Microlenders are eager to invest in the growth of an idea or business. A microloan’s primary purpose is to assist a small entrepreneur who may not have access to traditional finance and would otherwise be unable to borrow money.

When in the correct location, a microlender may make a lot of money with tenacity and patience. According to some research, up to 97 percent of low-income borrowers repay their loans on time.

As the global market emerges from the pandemic-caused financial crisis, now is a good time to review your strategy or develop a new one that can adapt to changing circumstances. The following are the key aspects that must be included in your MFI business plan:

Executive summary, business overview, target customers, market analysis, competitive analysis.

  • Products and Services

Marketing Strategy

Management team.

  • Financial Plan

The executive summary of your business plan will introduce the purpose of writing your business plan. It might be to get funds from authorities for start-up or it can be written to get support from organizations to expand your business. But it is probably the last section that you will have to create as it includes all the summarized sections of the business plan. This helps the reader to get very much idea of the purpose behind the business plan and all the necessary details that he/she might miss when reading the full business plan.

The content of your Executive Summary must be written in a way that should instantly engage the reader. Explain to them what kind of microfinance institution you are running or your current status. For example, Have you just started your business or do you want to expand?

Next, provide an overview of each of the subsequent sections of your plan for the Microfinance Business. For example, provide a quick summary of the MFI and lending sector. Discuss the sort of Lending Institution you run. Describe who is your direct competitors in the industry. Provide an outline of your target market. Explain how you are going to market your business in front of your target customers. Describe how you are going to generate income through this business. At the end of the Executive Summary, you must provide a summary of your financial strategy and projections for the next three or five years depending on the requirement of the reader

In this section, you will have to explain the kind of microfinance business you are operating.

When the business was started?

You will have to elaborate on the achievement you have during the business. The starting year and date of business must be mentioned here as well. Achievements may include sales targets met, customers attained, and the number of branches you are operating. Here sales targets means the amount of cash you just lend to your customers.

The next step is to provide the legal details of the Microfinance Business. Are you a limited liability company (LLC)? Is it a sole proprietorship business?

This section must include brief details about the targeted market. You must explain your targeted market including demographic and psychographic factors. With regards to demographics, including a discussion of the ages, genders, locations, and income levels of the customers you seek to serve.

On the other hand, psychographic profiles will describe your target customer’s interests and needs. The better you articulate and understand these demands, the better you will be able to attract and retain customers.

Customer research is always very important for Microfinance Institutions since the customers come from various types of businesses and individuals. Consider who you wish to serve and write in this section by justifying the reasons behind targeting them. Also, determine your customer’s demographics and how they make decisions keeping in mind their demands.

In this section, you are going to analyze your local market and the potential of Microfinance Institutions to fit into the market successfully. It would provide more value to the business plan if you provide hard data and statistics to show how the market has performed previously and how the market has been and where it is expected to grow. This detailed information helps the reader to understand the market so that he can take decisions more easily.

The location along with its value must be discussed in this section. If the real estate value in this area has decreased as a result of the pandemic or any other factor, you must show that you will still be able to make a profit from reduced rent for Microfinance Institution. If you are relocating your office to a location closer to the workplaces or communities of your target clients.

All these information are important for the applicant along with the average income of residents he hopes to serve, the percentage who owns their home, and the average number of people per household. This will help the reader to judge if the target market needs loans or not.

This section is very important since it needs a business owner to conduct research on their competitors. You should identify direct and indirect competitors of MFI’s including banks, as well as their strengths and shortcomings, and how your lending business will deal with them.

Product and Services

Include the breakdown of what percentage of interest rate you will charge from different nature of clients when providing them the required amount of loan. That should also include your plans in terms of the percentage of compound interest you will charge going forward after the second year of starting your business.

You should also include any special offer which you will provide to your customers depending on the nature of their business. It can be in the form of a different compound interest rate for those businesses. Also, use this section to provide details of any plans to change your policies in the future and including the projected cost for setting up your business.

This part covers everything you do to enhance your business including the initiatives which you are going to take in the future. This will help you to present yourself in front of your target market. Social media campaigns, membership drives, sponsorship of local events or charities, advertising, collaborations, and other marketing tactics are the few aspects that must be included in this section for the reader. This will help the reader to understand the aims and goals of your business.

It is also very important to include the projected costs for your marketing strategies to help your purpose. Also, consider including which employee will be responsible for each piece of the marketing strategy.

It is very essential to include the experience and skills of your team in the micro-lending businesses. This will send a message to the reader that the applicant is coming with a lot of experience which will increase the chances of getting funds or loans from a reader. However, you should also highlight any experience that you believe will assist your business to flourish. Include the expected expenditures for your marketing activities to assist your plan, and think about who is accountable for each component of the marketing strategy.

Financial Projections

This is usually the last section of your business plan. You must include your most recent year’s financials, as well as your expected income for the next several years, in this section. Those predicted revenues should be based on thorough market research. Financial forecasts must contain an annual profit and loss statement, a balance sheet, and annual cash flow statements.

Once you have developed a detailed MFI business plan, you are ready to meet your business goals, whether you’re requesting funding or simply pushing ahead to greater success for your business.

What’s the business plan?

A business plan is a template of your company operations, expenses and funding. It summarizes all of the essential facts that assist prospective clients, funders, lenders and other stakeholders understand what your company is attempting to attain.

THE BUSINESS PLAN PROCESS ENTAILS 5 FUNDAMENTAL STEPS:

  • Laying out your basic business concept.
  • Gathering data on the feasibility and specifics of your concept.
  • Focusing and refining the concept based on the data you compile.
  • Outlining the specifics of your business.
  • Putting your plan in a compelling form.

Why would you require a business plan?

Can be used to obtain financing.

Among the chief purposes of a business plan is to get funding from prospective lenders and investors. You may have the most visionary company idea in mind, however, you’ll find it hard to describe it to an investor in phrases without the support of a suitable business plan.

If you are seeking professional help, talk to us at 01 442 8230 or Text/Phone/Whatsapp 0851477625 or complete one of the forms below

Helps you think about your company in a strategic way.

As you can see from its construction, the company program is a detailed document which offers a great deal of advice for readers. It informs them about exactly what, when, why, where, who, and how of your small business.

It provides an excellent indication of what your company is attempting to reach and what you want to accomplish your goal.

Advantages of Business Plan:

It provides you a greater comprehension of market demand for your services and products and serves as the guiding document for establishing your enterprise.

A business plan will help you evaluate the current market and get details about the competition, clients, suppliers, and other important stakeholders.

Planning can help you develop your company gradually rather than committing a lot of resources too fast.

Drawing a strategy provides you a more realistic estimate of the funds and financing you’ll have to prepare the enterprise.

Many lenders and investors will request to see a business plan before they will consider devoting any funds to your company.

Cons of Business Plan

Organizing a business plan needs a great deal of market research so that it could be time-consuming

Writing a business plan requires complex comprehension and expertise in business management, bookkeeping, and advertising. If you do not possess these abilities, then you might find it tough to write.

It’s likely for you to overestimate or underestimate any earnings or expenses and receive unrealistic expectations for the company.

It’s also possible that you underrate the possibility of the company and choose not to pursue the venture, though it’s a rewarding venture.

Need Business Plan ? Contact us today to avail the best business plan writing services. We are Experienced in a number of Industries. Talk to us at 01 442 8230 or Text/Phone/Whatsapp 0851477625 or complete one of the forms below

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  • Business Plans Handbook
  • Business Plans - Volume 09
  • Financial Services Company Business Plan

Financial Services Company

BUSINESS PLAN     PRISMA MICROFINANCE, INC.

2 Claremont Street Boston, Massachusetts 02118

Prisma MicroFinance, Inc., is a private, mission-driven company with operating subsidiaries in Central America that provide "microcredit" to entrepreneurs. Since 1995, Prisma has provided lending and savings services to people in the developing world considered "unbankable" by formal financial institutions. By operating a profitable private-equity funded business in the Nicaraguan microfinance market—where most competitors are nonprofits—the company seeks to revolutionize and to grow the world's microfinance industry.

EXECUTIVE SUMMARY

Company overview, target market, operations & management, growth strategy & milestones, marketing & sales strategy, financial analysis, impact analysis & social return on investment.

Prisma MicroFinance, Inc., is a private, mission-driven company with operating subsidiaries in Central America that provide "microcredit" to entrepreneurs. Since 1995, Prisma has provided lending and savings services to people in the developing world considered "unbankable" by formal financial institutions. By operating a profitable private-equity funded business in the Nicaraguan microfinance market—where most competitors are nonprofits— the company seeks to revolutionize and to grow the world's microfinance industry. The company upholds a dual mission of providing affordable capital to "unbankable" individuals while operating an efficient, profitable business.

Why We Do It

At Prisma MicroFinance, access to affordable credit is considered a right, not a privilege. Providing affordable capital is a business model that will allow the company to offer reliable financial returns and significant social returns to its investors, while providing a valuable service to its borrowers. "We believe in doing well by doing good."

The Management

Prisma's management team has a total of over 25 years of experience in the microfinance industry. They have worked together for five years and their track record proves that they have the necessary skills to guide the company as it expands throughout Nicaragua and Central America.

The worldwide microfinance market is large, underserved, and growing at a rate of 30 percent annually. The worldwide market is estimated to be $270 billion, with current annual cash turnover of $2.5 billion. The Nicaraguan market is $300 million, with $50 million being lent at rates averaging 60 percent APR. There are more than 20 significant entities in Nicaragua providing microfinance services, with no single one holding more than 13 percent of market share.

The Customers

Prisma's customers are individuals who are not in an economic position to secure funding from traditional financial institutions. The majority are small-business owners, operating in the Nicaraguan capitol of Managua. Prisma has a strong lending history with taxicab owneroperators, and it plans to solidify its reputation within this market. By FY2004, its customer base will be an equal split of micro, small, and medium-size business owners.

Competitive Advantage and Profitability

Prisma embodies a profitable business model with four major components: local and inexpensive labor, market penetration in cooperative taxi financing, externalization of costs by partnering with third parties, and the use of effective technology. Unlike its competition, Prisma has operated without subsidies or grants since day one for over five years while also providing healthy returns to its financial backers. Moreover, Prisma lends at rates of 31-34 percent APR, two thirds of the average competitor's rate.

Marketing and Sales

Prisma's marketing and sales strategy has been extremely successful, yet extremely cheap. As word of mouth has been Prisma's biggest source of sales, marketing activities have been focused on keeping clients happy and recognizing their accomplishments. The social structure and business culture that has made this approach a success in Nicaragua exists throughout Central America.

Financial Services Company

Key Milestones

  • Raise Series "B" $1.5 million Investment Round
  • Grow loan portfolio to $1 million
  • Make 2,000th loan
  • Diversify portfolio to 60/40 taxi/non-taxi loans
  • Expand board to 7 members
  • Establish Advisory Board
  • Report on new location for central office
  • Close Series "B" $1.5 million Investment Round
  • Grow loan portfolio to $4 million with debt
  • Make 4,000th loan
  • Diversify portfolio to 50/50 taxi/non-taxi loans
  • Expand Central Managua office
  • Complete Central American expansion report
  • Raise Series "C" $4 million Investment Round
  • Grow loan portfolio to $5 million
  • Make 6,000th loan
  • Diversify portfolio to 40/60 taxi/non-taxi
  • Open second Nicaraguan office
  • Lay groundwork for operations in second country
  • Close Series "C" $4 million Investment Round
  • Grow loan portfolio to $10 million
  • Make 10,000th loan
  • Achieve balanced "Prisma Portfolio," even split of Micro, Small, Medium loans
  • Open third and fourth Nicaraguan Offices
  • Begin operations in second Central American country

Funding Goals

Prisma is raising $1.5 million in its Series "B" round to grow and expand business, both the total number of customers it serves and the region in which it offers service. The company has planned an aggressive, but realistic, expansion strategy. By the end of FY2004, Prisma will be lending 4,800 loans profitably in four Nicaraguan cities and a second Central American country with a total lending portfolio of $10.56 million.

Use of Funds

Prisma seeks to expand its current successful model. The funds from the sale of stock will be used to leverage debt in order to expand the loan portfolio.

Prisma MicroFinance, Inc.'s, Mission Statement:

To provide our customers superior financial services, fostering opportunities for wealth and employment creation, while maximizing social and economic returns for our investors.

The Company

Prisma MicroFinance, Inc. (Prisma) is a United States corporation registered in the state of Massachusetts. The company was founded to be a development bank—making loans in small amounts widely available to people in the developing world. This growing industry is known as "microfinance."

The necessary capital to operate Prisma is raised through private equity and debt from individual and institutional investors in the developed world. With $1.5 million in new equity, the company will be able to support expansion efforts and leverage at least this amount in debt financing. This capital will accelerate growth, exponentially increasing the number of customers and amount lent. Prisma's customers are primarily business owners who do not have access to affordable capital to finance their operations because they are considered unbankable by traditional financial institutions. Although these poor business owners may operate on a very small scale, their operations are profitable. They remain locked in the poverty cycle because of the premium they pay for being perceived as a risky investment. Prisma's experience, and that of the microfinance industry in general, has proven just the opposite. Lending to poor individuals poses risks because of the precarious nature of their cash flows, but providing them access to affordable capital allows them to even out cash flows and break out of the poverty cycle.

Prisma does not conduct its operations for charity. It is at the forefront of the B2-4B revolution—meaning it is finding business solutions for the four million poor people of the world. Companies such as Hewlett-Packard are investing significant capital into this area not only because of the social upshot, but because it is good business. Prisma has operated profitably for five years by targeting a market opportunity that is large, underserved, and in which the competition is fragmented by industry standards. Prisma offers less expensive products to consumers with better service than its competitors.

Company Name

"Prisma" means "prism" in Spanish. Prisma MicroFinance, Inc. "refracts" private capital investment from the developed world, funneling it to small business owners in Central America who traditionally have lacked access to capital but who are entrepreneurial and commercially savvy operators.

Prisma's spectrum covers providing access to credit and financial services for people living in the developing world. The diversity in loan size creates a balanced portfolio serving a range of people. A single loan officer can easily and profitably manage a cost-effective portfolio that includes loans of different sizes. In this way, Prisma embraces its dual business focus of:

  • Providing capital to "unbankable" clients
  • Ensuring market rate returns for investors

Company History

Prisma was begun in 1995 as a savings and loan cooperative called SINAI, R. L. (Support and Incentives for Autonomous Initiatives) founded by a Nicaraguan, Roger Aburto, and an American, David J. Satterthwaite. They shared a common interest in assisting poor business owners overcome barriers to success. The two founders started operations completely through grassroots efforts with $1,000 in personal start-up capital and a $4,000 loan from American businessman George Kraus, who is now a Board Member. For its first two years, the company conducted its activities out of a single room in Roger's house with a home computer.

Prisma has grown steadily from the beginning, averaging 387 percent annual growth rate as measured by total loan portfolio under management.

Prisma Growth: 1996-2000

Financial Services Company

The organization's growth has been funded completely with private investment. In December of 2000, the Nicaraguan loan portfolio was at just over $850,000 distributed to 236 loans. The average loan is $3,000 and is repaid within 22 months. Phenomenally, in 1,500 loans, Prisma's default rate is less than 1 percent. The single most limiting factor throughout Prisma's history has been lack of capital. At present, the organization has nearly 200 approved loans waiting for sufficient funds to grant them.

Prisma's first client in 1995, Arroya Rios Vallejos, borrowed $500 for inventory for her corner store. She has since received and repaid four loans, and now owns her own home.

Unlike the overwhelming majority of microfinance institutions that depend on donations, Prisma's entire loan portfolio has instead been financed by debt from individuals and commercial institutions. Prisma has consistently offered interest rates at 31-36 percent APR, significantly lower than the competition's rates of 60-80 percent APR. The company has continually sought to maintain efficient and modern operations, thus creating a vibrant business culture prepared to confront a demanding marketplace.

Products Offered

Prisma is a financial institution. Its principal operations are as a lender to customers typically viewed by the industry as "unbankable." Prisma makes loans, at risk-adjusted market rates, from $50 to $15,000 dollars. This range is often referred to in the lending profession as "microfinance" because of the size of the loans.

All customers require a co-signer and character references for loan approval, creating a circle of trust for lenders. All loans over $500 require guarantees and/or collateral. Interest rates start at 24 percent a year, plus fees. Loan interest rates vary depending on loan size, customers' credit, and other risk factors. Loan terms have ranged from 3 months to 3 years. For the Nicaraguan operations, the median loan term to date from the last 300 loans was 2.4 years.

Prisma has ongoing relationships with customers over the life of the loan. By maintaining contact with customers, early interventions save troubled loans. For example, the company offers customers in good standing (taxi owners in particular) additional working capital lines of credit. This ensures that their business is not disrupted due to cash flow crunches or unexpected occurrences including a car accident, a sick family member, or "inclement weather." Prisma also encourages evening out cash flows by requiring that customers put 5 percent of every loan into a savings account. For first-time borrowers, this amount is folded into the loan amount.

Borrowers in good standing, called class "A" customers, gain more latitude in available credit, which they use to restructure existing loans or get new ones. Customers increase their standard of living as a direct result of these loans.

Loan Products

  • Micro Loans ($50-250)—primarily made to low-income individuals for consumer purchases and micro-entrepreneurs for business-related expenses. Micro loans are most often made to women. Business owners buy inventory and consumers purchase domestic appliances, such as refrigerators or stoves.
  • Small Loans ($251-1,000)—primarily made to business owners. They purchase inventory and/or capital investments like machinery—freezers, sewing machines, or power tools.
  • Medium Loans ($1,001-15,000)—primarily made to taxi owners to purchase new vehicles. These loans assist business owners graduating from small loans and growing owner-operated businesses seeking to expand. Extensive due diligence and more rigorous guarantees are required.

Sources of Revenue

LOAN REVENUE: The revenue stream from a loan is derived from three sources.

  • Interest: A 24 percent annual rate is carried over the term of the loan. This rate is considerably lower than competitors' rates, which average at least 60 percent in the Nicaraguan microfinance industry. This revenue source accounts for 51 percent of Prisma's historical income.
  • Legal Fee: A flat legal fee is charged for the origination of every loan, usually $30, which is carried over the life of the loan.
  • Origination Fee: A 6 percent origination fee is charged that is carried over the life of the loan. This fee accounts for 7 percent of Prisma's historical income.

Additional revenue is derived from:

  • Loan Late Payment Charges: Delinquent clients pay an extra 0.5 percent on the late balance. Almost 20 percent of the outstanding loans are assessed a late fee at some point during the life of the loan. But, at any one time, only 5 percent are in arrears. This revenue source accounts for 8 percent of Prisma's historical income.
  • Savings Accounts: All clients are required to maintain a savings deposit with a balance of at least 5 percent of the amount borrowed. Prisma provides customers the initial 5 percent required in the loan itself. Savings accounts earn 8 percent annual interest. As this rate is on the high end of the market, the majority of customers carry at least a portion of their savings with Prisma. Savings account volume in Nicaraguan has been 5-10 percent of the total loan portfolio.
  • Currency Exchange: Prisma conducts all operations in U.S. dollars because the local economies in which Prisma operates currently, and plans to operate in the future, are less stable. Operations in dollars minimize the currency risk and economic influences on the value of the portfolio. Loans are made and collected in dollars; however, the accounts for subsidiary operations must, by law, be carried on the books of the subsidiary companies in the local currency. On average, currency exchanges accounts for 15 percent of Prisma's historical net income.
  • Automobile Insurance: This is a new product offering for Prisma; 50 policies have been sold since March 2000. Although it is a lucrative new offering, income is not realized for a policy sale until the end of the fiscal year. In fact, it is carried on the books as a liability. Offering insurance is a value added for several reasons. One, the company ensures that all cars it finances are insured. Two, competitive advantage lending to taxi drivers provides a captive market for the product. Last, profitably expanding services beyond just lending is a positive entry to offering additional products and services to customers that trust the company.
Smart people are not confined to the developed world…. Any company that doesn't figureout a way to get connected with the poor [of the Third World] will not tap huge potential. —Carly Fiorina, CEO, Hewlett-Packard

The Global Microfinance Market

Prisma MicroFinance, Inc., operates in the large, growing, yet underserved market of microfinance lending. The MicroCredit Virtual Library estimates that there are currently 7,000 microfinance institutions worldwide, serving approximately 16 million poor people. The total cash turnover for these institutions is $2.5 billion.

Of the estimated 500 million people who operate micro or small businesses around the world, only 10 million have access to financial support for their businesses (Source: Micro-credit Summit).

Worldwide demand for credit by this population is almost limitless. Based on an average loan size worldwide of $550, demand for microloans is approximately $270 billion. The annual growth rate of the world microloan portfolio is 30 percent, with some estimates as high as 70 percent (Source: Micro-credit Summit).

The spectacular growth rate of the microfinance industry is in large part due to the difficulty that the vast majority of people in the developing world face in gaining access to credit. The strict demands and cronyism of commercial banks makes it nearly impossible for an average citizen to get a loan.

Demand in Nicaragua

Prisma focuses its activities in the markets with which it is most familiar—Central America. With five years of profitable operations in Nicaragua, the company knows how to conduct successful business in these markets. Currently, the company operates in Managua, the capitol city of Nicaragua, and has made approximately 1,500 loans to date. Lending is limited only by the amount of capital available to lend.

Nicaragua is an attractive market for microfinance. Despite the American image of the country as economically volatile and politically unstable, Nicaragua has had open markets since 1990. In 1990, Nicaraguans elected as president Violetta Barrios de Chamorro who enacted market economy reforms in 1991, privatizing 351 state industries. The 1996 election of Arnoldo Alleman marked the continuation of government policies favoring a market economy. These policies remain in place today.

The economy largely consists of coffee, cereal grains, sesame, cotton, and bananas. Agriculture provides 34 percent of Nicaragua's GDP, the highest in Central America; however, over the past decade, there has been a shift in the workforce away from the agricultural sector toward urban, service sector jobs. Approximately 46 percent of the labor force is now employed in the service industry, compared to 28 percent in agriculture and 26 percent in manufacturing, construction, and mining. Nicaragua's major trading partner is the United States and its major exports are cotton, sugar, seafood, meat, and gold. Economic highlights about the country include:

  • GDP of $2. 01 billion in 1998
  • GDP per capita of $420
  • Population of just over 4, 800,000
  • Inflation rate consistently under 10 percent since 1994

The Nicaraguan Small Business Bureau estimates that the number of micro and small, nonagricultural businesses in Nicaragua is 152,607, excluding informal businesses, such as street hawkers and market vendors. Micro and small businesses are defined as having less than 5 employees. They employ 267,000 individuals, and are largely family-run enterprises. Informal businesses, typically a one-person operation, are estimated to be up to double those numbers. The government estimates that 60 percent of urban economic activity is conducted at the small, micro, or informal sector—a major driver of the local economy. With the average micro or small loan in Nicaragua estimated to be $585, based on industry data, this indicates an almost $300 million market in Nicaragua alone. The microfinance market, as a segment, is currently underserved. The total outstanding loan portfolio for Nicaraguan microfinance institutions is $47.9 million. Based on Prisma's experience, approximately 50 percent of all businesses in the country have access to some form of credit, either from formal institutions, family/friends, nonprofit microfinance lenders, or moneylenders. This number skews disproportionately to the larger companies, namely those with at least 20 employees or who are involved in export. Lending available to this population is at rates or terms less attractive than Prisma offers. Nonprofit lenders typically charge 60-80 percent APR, moneylenders are as high as 40 percent a month, and capital from family/friends is highly limited.

Within the large number of businesses operating in Nicaragua, there are numerous segments that are especially attractive for microfinance lending. Some unifying characteristics include:

Specific businesses that have been excellent customers to date include:

  • taxi drivers: make daily or weekly payments and provide excellent collateral
  • employee associations: act as an intermediary, thus improving the security of consumer loans
  • community banks: increase the efficiency of servicing microloans

The Prisma target customer is a self-employed businessperson, either female or male, who lives in an urban area with his or her family. One of the most lucrative market segments Prisma loans to is taxi owners.

The Nicaraguan Microfinance Market

Although the countries in Central America are diverse, all have one thing in common: taxi cooperatives. There are more than 8,000 taxis operating in Nicaragua and the market is expanding. The Transportation Department estimates the number of new licenses granted will increase the total at least 10 percent a year for the next three years.

In Nicaragua, taxis are owner-operated and are considered medium-sized businesses. The owners are called "taxistas." They are organized nationally into 240 cooperatives. The cooperative structure gives the members bargaining power, purchasing power, and a strong social network.

In 2000, Prisma held about 2 percent of the taxi finance market within a fragmented market where no single competitor dominates. Taxi financing is a patchwork of banks, finance companies, car dealers, and other sources of informal financing. No financial institution has captured this market.

Expansion Strategy: Prisma will specialize in financing "taxistas" as a spearhead to establishing operations nationwide in Nicaragua and in other countries in Central America.

Prisma has made 250 loans to date to this population. Because the market is regulated through licenses, business is lucrative for the "taxistas" and loan repayment has been impeccable. Furthermore, in a recent Prisma survey of 80 drivers, 80 percent said they had or needed financing, whereas only half have existing access to financing.

Of the 3,200 "taxistas" who currently want financing, Prisma is positioned to capture the best of these clients, assuming the following:

  • Prisma's 4-year track record of successfully working with taxi owner-operators will continue
  • The average "taxista" loan to date of $5,993 for a term of 2.4 years is indicative of this market
  • Any potential "taxistas" who are bad credit risks can be replaced because Prisma offers better credit terms
  • A taxi is replaced every five years

This market segment is worth $11.52 million. For Prisma, further penetration into this market is currently limited only by capital. The Nicaraguan operations currently have 200 pending loans that have been approved, but there is not sufficient capital to lend.

Prisma will specialize in financing "taxistas" as a spearhead to establishing operations nationwide in Nicaragua and in other countries in Central America. Small, low overhead offices will be established in other urban centers. Strategic partnerships with a national bank and car dealers will enable Prisma to centralize lending and collections processes while still maintaining national coverage. This strategy coincides with market trends: new licenses are currently overwhelmingly granted outside the capitol.

Taxi owners are low-risk customers with excellent sources for collateral. They have the insured vehicle itself and an operating license that has value within the cooperative with which Prisma has outstanding relations. Moreover, the cooperatives must co-sign on a Prisma loan. This provides an important set of organizational incentives to re-pay loans. Finally, all taxi loans must be guaranteed by a lien on real-estate.

Serving this market segment is an excellent example of Prisma's double bottom line. Loans made by Prisma to "taxistas" serve independent business people while also placing large amounts of capital quickly and securely. A loan to this population enables a customer to have an annual income of approximately $1,000, almost twice the national average. Given that the average "taxista" has 6 dependents, Prisma's lending helps a huge number of people achieve a decent, although still precarious, standard of living. In this way, the Prisma social return, like the Prisma loan portfolio, is balanced: the emerging middle-class is encouraged while also supporting those on the economic margins.

Nicaraguan Competition

The total outstanding loan portfolio for Nicaraguan microfinance institutions is $47.9 million and Prisma currently has 1.2 percent of the market. Prisma's major competitors, in order of threat to the company, are:

  • Other microfinance institutions
  • Other formal lending institutions
  • Money lenders
  • Family/friends
  • Potential customers not borrowing

Prisma is confident that its customer network is established enough to overcome the first three threats through word of mouth. In reverse order, here is an overview of each.

Potential Customers Not Borrowing: The most common action by potential customers at this time is not to access capital or credit, due to fear, lack of understanding, or no market opportunity. This dynamic clearly drags the economy in a number of ways, creating a significant dis-incentive for individuals to participate in the market economy.

Borrowing from Family and Friends: When individuals cannot turn to institutions, they turn to family and friends. On the practical level, this typically results in under-capitalization of potential successful businesses because family and friends are confronting the same dearth of capital.

Money Lenders: These are usually local individuals that lend money to people at interest rates that reflect their ability to provide capital quickly for their customers with limited focus on due diligence. Interest rates for this immediate access to capital are frequently as high as 480 percent APR. Prisma's significantly lower interest rates make it an attractive alternative to money lenders even if the turn-around on loan issuance is not immediate.

Other Formal Lending Institutions: There are a wide variety of formal lending institutions in Nicaragua who serve business owners. For the most part, these institutions would only be interested in Prisma's clients who take out the largest loans, namely the taxi cooperatives, because the others would be viewed as too risky. Prisma has a competitive advantage over formal lending institutions because it has been directly serving this target market for five years, knows the customers, and wants to serve them where the formal banks do not.

Other Microfinance Institutions: These institutions are Prisma's biggest threat. Many have as much experience as Prisma; however, their interest rates are much higher, hovering anywhere between 60-100 percent APR. Prisma's competitive advantage over these institutions is that its interest rates are considerably lower. Prisma is also a nimble company, with the ability to adapt its loans to the needs of the customer. Prisma is among the top twenty players in the Nicaraguan microfinance landscape, which controls at least 80 percent of the total market, the remainder of the market being served by money lenders. Even with this relatively small number of players in the market, it is still fragmented, with the largest organization controlling approximately 13 percent and the smallest less than 1 percent. The following table gives a breakdown of competitors' loan portfolios and growth.

Nicaraguan Microfinance Institutions: Portfolio and Client Data in Thousands of Dollars (Source: ASOMIF)

Financial Services Company

Potential future competition: In this growing market, there are potential future competitors. Banks may move "down the line" to capture a portion of this market share, and direct competitors within Nicaragua may expand their operations. Prisma will draw on the relationships it has established throughout the Nicaraguan microfinance industry, its knowledge of government regulations, and its understanding of industry dynamics to preempt this competition.

Barriers to Entry

In-House Knowledge: Running a microfinance company requires extensive knowledge of banking, financial management, sales, and community outreach. A successful MFI needs a staff with a unique blend of skills. Prisma MicroFinance has attracted employees that bring these skills and has also spent time and energy on professional development. Organizations interested in starting a microfinance company will have to be dedicated to developing the requisite internal capacity as Prisma has done, and this can be costly and time consuming.

Staffing: Microfinance has been driven by nongovernmental agencies. As such, management and individuals working in the field usually come from a social service delivery background rather than a business background. However, microfinance is based on business fundamentals. Attracting individuals from the business sector has historically proven challenging because of the pay differential and lack of compensation incentives such as employment stock option plans. Prisma has already been able to attract staff from the business sector by offering competitive salaries; by converting to a for-profit stock company Prisma is now in a position to offer ESOPs, thus narrowing the differential between for-profit and nonprofit compensation packages. New ventures not in a position to do this will be hard pressed to attract employees with the skills necessary to run a successfully microfinance company.

The managers and directors have worked together since the beginning of operations in Nicaragua in 1995, boasting over 25 years of combined experience in the microfinance industry.

President, CEO, & Co-Founder: David J. Satterthwaite has six years of microfinance experience in Nicaragua and Latin America. David has also worked as a business consultant, researcher, and teaching assistant. He graduated with honors from Haverford College in Pennsylvania and is currently completing graduate work in Social Economy at Boston College.

General Manager (COO): Carlos Alberto Aburto Villalta has been responsible for Nicaraguan operations since 1998 and held previous management positions within the company prior to becoming COO. He holds a five-year undergraduate business degree from the Universidad Centro Americano (UCA) in Managua, Nicaragua, and is currently a candidate for a master's degree in business from the UCA.

Portfolio Manager: Honey Maria Aburto Villalta has been the loan portfolio manager since 1998. She holds a five-year undergraduate law degree from the Universidad Centro Americano (UCA) in Managua, Nicaragua, and is currently a candidate for her master's degree in labor law from the UCA.

Board of Directors

Roger Aburto: Co-founder of Prisma. Roger currently runs Xilonem, a cooperative spin-off from Prisma, which manages the insurance fund and past-due collections. Roger's experience includes: manager for a regional micro-credit fund for 8 years, a small-business owner, and a veteran. His education includes graduate work on the Nicaraguan informal economy.

Richard Burnes: Co-founder and Principle of Charles River Ventures (CRV is not associated with Prisma). Rick has been an investor in Prisma since its beginning in 1995.

George Kraus: As a retired entrepreneur, George supports a variety of humanitarian and business projects in Nicaragua. He has been an investor in Prisma since its beginning in 1995.

Financial Services Company

Board of Advisors

Erica Mills, Master of Public Administration, marketing and communications consultant

Drew Tulchin, Master of Business Administration, business consultant

Brady Miller, former Director of Finance for Ex-Officio, finance consultant

Professional Staff

Nicaraguan professionals:.

Marco Morales, CPA

Oscar Silva, Legal Counsel, Delaney y Asociados

United States Professionals:

Tom Herman, Legal Counsel, Smith & Duggan, LLP

Howard Brady, CPA, MFI Consulting, Inc.

Daniel MacLeod, Graphic Designer, Visual Braille, Inc.

The Prisma Sales Experience

  • Clients visit a Prisma office to request an application.
  • Clients with strong references receive an application; careful track is kept of who receives them.
  • If, upon review of the application by the Credit Committee, the customer is deemed to be an acceptable credit risk, preliminary approval is granted.
  • A site visit is made to interview the customer, verify application details, and review collateral.
  • Clients provide all necessary paperwork—including signatures and guarantees. The complexity of this process depends on loan size.
  • Larger loans, including taxi loans, can take months because of the due diligence involved. It includes a police record review.
  • The process is uniform and straightforward to ensure all customers receive the same treatment.

Prisma's operations and management has five years of successful, profitable lending experience in the Nicaraguan market. The company has developed successful activities for ensuring it is providing excellent service and developing strong relationships with solid customers, ensuring that the loans will be repaid.

Key Management Philosophy: Prisma conducts business in a highly professional and open manner. The company's philosophy is centered on knowing customers, working with them to be successful, making sure they understand how their loans work, and rewarding good behavior.

Streamlined Processing: Customers are classified from A-D based factors including: payment timeliness, credit history, savings, referring new business, and peer performance (those they referred or referred them). The taxi co-ops are classified according to the same criteria by each co-op as a group. There are rewards and tangible benefits for "A" customers, knowledge of which is spread among customers through word of mouth.

Balanced and Cost-effective Loan Portfolio: The existing relationship with Taxi Cooperatives provides an inroad for nationwide market penetration. A single loan officer covers the costs of his/her position with only 20 taxi loans (approximately $5,000 each). Microfinance industry data indicates loan officers can manage 150-300 loans at one time. Therefore, because the breakeven point for an additional lender is low, Prisma can financially afford to have a balanced portfolio with an equal number of micro and small loans. Although smaller loans are less lucrative, they are financially viable for the business and promote the social mission of ensuring there is access to credit for all. In addition, they provide the benefits of being repaid faster, requiring less due diligence, and producing a high number of referrals.

Hand-held Technology and Centralized Due Diligence: In order to minimize infrastructure costs, back-office support for loan officers will be centralized. Loan officers will utilize advanced technology to conduct their business. Hand-held devices will be used in the field to mechanize the application and monitoring process. The loan portfolio data is stored electronically to minimize onerous paperwork. This equipment investment pays for itself in the reduced paperwork, time savings (especially in approving applications and transferring data). Electronic loan processing and bi-weekly visits to the main office will allow the due-diligence of loan guarantees to be performed with adequate legal review, in a timely manner.

In addition to this technology, Prisma will also take advantage of technology being designed by groups like Hewlett Packard's World e-Inclusion team that is developing networked tools with the express purpose of making microlending more efficient. With a commitment of selling, leasing, or donating $1 billion in products and services to this initiative, it could prove a valuable source of technology enhancement.

Strategic Banking Partnership: To minimize expansion costs and accelerate the amount of lending possible, Prisma plans to partner with a bank with national presence. By utilizing their existing infrastructure and brokering the deals, remote offices avoid the complications of handling cash. This provides benefits in efficiency and also safety/security. Prisma has a developed a relationship with Banco de Finanza, a national leader in web-based delivery of banking services.

Vested Managers: A generous Employee Stock Option Plan creates a vested management team. Vested managers are important to providing motivation for the growth strategy. With these economic incentives for employees, Prisma has a competitive advantage compared to other microfinance lenders, including:

  • nonprofits—unable to offer their managers a portion of the potential upside
  • newly established stock companies controlled by directors from the nonprofit sector— unlikely to implement market-based incentives due to employee culture bias

Growth Strategy

Prisma's market niche in taxi financing allows management to plan significant portfolio growth while minimizing overhead. Prisma will specialize in taxi financing as a spearhead to establishing operations nationwide in Nicaragua and in other countries in Central America. Using Prisma's specialization in taxi finance in this way drives penetration of the micro-credit market while still maintaining healthy profit margins.

In fiscal year 2002, Prisma will relocate its Managua office to prepare for national and international expansion. The new office space will accommodate the additional staff needed for expansion, while remaining in a geographically strategic location that will be convenient for Prisma's borrowers. In FY2003, the first satellite office in Nicaragua will be established, with two more additional national offices in FY2004. Also, in FY2004 Prisma will begin operating in a second country in Central America, to be determined depending on market opportunity.

Loan Officers: Prisma can realistically project rapid portfolio growth because of the proven demand for taxi financing and Prisma's track record financing taxis. Assuming that a single loan officer will manage 200 loans (a conservative estimate by industry standards), management estimates needing 25 loan officers by FY2004 when the total loan portfolio will be worth almost $11 million, distributed among 4,800 clients.

Scalability: Management forecasts steady profits for FY2001, although net income is projected to be slightly lower than FY2000 due to the integration of the U.S. operations. FY2002 will see a 100 percent growth in net income over FY2001, although management will advise reinvesting the profit into the company to support the growth strategy. Investment toward scalability during these two years will begin to pay off in FY2003, when management forecasts a 10.9 percent return on shareholder equity. Between FY2002 and FY2004, the portfolio balance per loan officer in order to break-even drops from an aggressive (but tenable) $470,000 down to $225,000 (total portfolio/total expenses). Securing the taxi financing niche and introducing operational improvements such as the use of hand-held technology makes the Prisma business model scalable.

Taxi Financing Market Share: Assuming that three-fourths of all medium-sized loans will be taxi loans and a 10 percent annual growth in the taxi sector, Prisma will claim a 22 percent market share by FY2004.

Central American Expansion: Nicaragua serves as a launch pad for entering the Central American market. In FY2004, Prisma plans to open operations in a second Central American country. This is a large and important market. (A Central American target market analysis can be found in the appendices.) The central challenge in expansion will be hiring effective management; for this reason, we are adopting a conservative expansion schedule. The taxi finance market will serve as a spearhead regardless of which country is deemed most appropriate.

Scalability Goal: Equity in Prisma is a long-term, non-liquid investment. The objective of achieving scale in the microfinance industry requires patient capital. "Scale" signifies at least the $50 million portfolio necessary to credibly solicit commercial capital investment. This will take 5-10 years. Scale is Prisma's mandate in order to be a leader in establishing new private equity capital markets for the microfinance industry.

Financial Return & Exit Strategy

The founders' choice in 1995 not to accept donations or subsidies to run this business was unheard of in the microfinance field at the time. However, since day one, Prisma has been dedicated to utilizing the essential potential of microfinance to eradicate poverty: making it economically attractive for capitalists to invest in "unbankable" business people. This choice has resulted in two truisms: private capital seeks scale to maximize profits and in order to achieve scale, equity is required. Therefore, consideration of the liquid event on this investment is imperative.

Because there are currently no secondary markets for Prisma stock and no one has yet to systematically "securitize" microloans, the most viable exit strategy for investors is acquisition.

Prisma has had discussions with major U.S. banks and has a clear understanding of what characteristics would be needed in order for an acquisition to occur. A national or international loan portfolio in taxi finance and a total loan portfolio of at least $50 million will make Prisma an attractive acquisition to larger banking institutions. These are the principal reasons that Prisma seeks to capture a niche market and grow its loan portfolio—to bring value to investors supporting micro-loans, which at present are unproven in secondary markets.

Financial Returns to Investors

First and foremost, Prisma is committed to providing its investors with dividends, even in the early stages of growth. Prisma has been profitable for five years, since its first day of operation. This proven viability legitimizes the plan of paying dividends. Management thinks it imprudent to forecast the value of dividends at this time. The financial projections indicate healthy profits in FY2003 and FY2004 of 10.9 percent and 11.5 percent respectively, once scale is achieved.

Moreover, Prisma seeks capital appreciation for its investors. Prisma anticipates that capital appreciation will be augmented in the future by the creation of business spin-offs and offering of additional products. Business spin-offs could include auto repair, auto parts, car insurance and collections. Additional products might be credit cards, mortgage financing, or home-improvement loans.

Social Returns to Investors

Like a bank, Prisma is a profitable lending business. But Prisma stands apart from its commercial counterparts for two reasons:

  • it targets people without access to traditional, financial resources
  • it is a business that realizes social as well as economic returns

Social returns constitute positive impact beyond the immediate benefits offered by a product —in this case small loans. Micro-lending is a business and development strategy widely acknowledged to bring extensive and diverse social returns to local communities. Well-managed, sustainable programs have been proven to successfully empower borrowers, strengthen families, catalyze communities, and expand local markets.

When an individual generates income from a small loan, the benefits extend a great distance and in many directions. Borrowers become more responsive to the needs of their families, and more active in their communities. Breadwinners are able to provide improved healthcare and education to their families, so children grow up healthier and with greater opportunities to realize their own potential. Families become stronger through access to working capital and the resulting opportunities. The fabric of communities becomes more tightly woven when it has a greater stake in its own development and can realize the benefits of its own efforts.

Prisma's clients and investors are able to realize tremendous social returns precisely because the company is profitable. Based on our estimates, every dollar lent generates $21 of social benefit for the borrower. For Prisma, profitability and sustainability are indicators that customers are using and repaying their loans successfully. This, in turn, means resources are more readily available for loans, and the social returns mentioned above go hand in hand with the unfettered availability and successful use of working capital.

Finally, as a market-driven social initiative, Prisma provides social returns at a larger scale with accelerated impact because it attracts investment.

Marketing Strategy

Because Prisma is mindful of the fiscal operations and expenses necessary to run a profitable enterprise, the marketing budget is, by design, small and highly focused on very basic, interpersonal efforts. Only those activities that provide proven return and bring in new loans to achieve the intended growth and projection figures are undertaken.

Grassroots marketing and establishing trust with customers has been the hallmark of the Nicaraguan operations to date. These efforts led to a 207 percent growth in Prisma's loan portfolio between 1996-2000. Ensuring positive customer experience has led to word of mouth as the leading source for new client acquisition. In a country like Nicaragua, where relationships and community are the mainstays of business activity, the "word on the street" is the best marketing channel and a strong indicator of a company's reputation. It is also inexpensive.

Other channels for publicity, especially formal channels including print media, television, and radio, will not yield sufficient response for their cost. The target customers are typically distrustful and skeptical of formal institutions, if not outright intimidated. Therefore, relationship marketing like face-to-face communication and rewarding referrals has a much larger impact, not to mention lower acquisition cost.

Marketing activities follow the same standards as operations, described earlier. This includes knowing customers, working with them to be successful, making sure they understand how their loans work, and rewarding good behavior. Customers are classified from A-D based factors including: payment timeliness, credit history, savings, referring new business, and peer performance (those they referred or referred them). The taxi co-ops are classified according to the same criteria by each co-op as a group. There are known rewards and tangible benefits for "A" customers—including better interest rates.

New loans are most easily made through the "chain of trust," whereby existing or old clients vouch (co-sign) for new customers. The practice of allowing "A" clients to co-sign, helping friends and family secure loans, provides Prisma with essentially a free sales force, minimizes default rates, and provides a support network to support struggling customers. Customers are highly loyal; they support the lending institution because they are supporting each other and helping themselves.

Promotional activities include simple and basic activities for existing customers and important members of the community including receptions, small gifts, and a newsletter. An annual reception is held to thank customers and share what the organization is doing. Customers feel valued and that they are contributing to economic development in their country. "A" clients receive little gifts on holidays. These gifts are inexpensive but customers appreciate them.

Marketing in New Markets

When entering a new market—first in other cities in Nicaragua and later in other Central American countries—the same tactics will be used. A major key to success is in effective new hires with strong professional and social networks that can share what Prisma does. Word of mouth is effective among family, friends, and the taxi co-operatives—all of which have connections in locations targeted for expansion and are just waiting for Prisma to establish operations there.

Indicators for measuring the success of marketing efforts is in how little money is spent to achieve Prisma's growth milestones. Customer satisfaction will remain the lynchpin of Prisma's marketing strategy.

Sales Strategy

As noted in previous sections, this enterprise is not starting from scratch. Prisma has five years of profitable operations upon which to base its sales activities. Most of the efforts will be on maintaining the current methods and practices that have made the company successful to date—lending to individuals in groups that know each other, providing excellent service, building trust with customers, and working with customers to ensure a successful loan.

The Nicaraguan operation has worked well with the taxi cooperatives. Since 80 percent of taxi drivers report requiring external funding to ensure they can operate successfully, this is a target market with very likely customers. Furthermore, most cannot or choose not to be served by more formal banks. Even better, the taxi cooperatives are close-knit business and social circles. Therefore, taxi drivers easily see what a loan from Prisma does for their business because a co-worker and friend has directly benefited from it. Drivers ensure their colleagues do not default on their loans because they are co-signers and do not want to lose this resource for affordable capital (and an "A" rating). In the event of a default, the entire cooperative could lose the lending service and the co-signers will be stuck with the bill.

Capital Structure

Prisma's business model makes two assumptions:

  • Equity capital is the only source of capital that will enable the company to achieve its expansion goals while maintaining a solid balance sheet.
  • U.S. investors are looking to invest in companies that value social responsibility.

Prisma's five years of profitable operations confirms the first assumption. From its inception, Prisma has been financed through debt. Prisma has serviced these debts and remained profitable, but relying solely on debt capital has limited the company's growth as evidenced by the fact that Prisma has 200 approved loans waiting to be financed.

The New York Times' front-page article "On Wall Street, More Investors Push Social Goals," from February 11, 2001, bolsters the second assumption. Increasingly, investors are realizing that there "is a correlation between good practices and good investment results" and are placing their money accordingly. An analysis of "Socially Responsible Investing" proves that investors are increasingly adopting an investment approach that integrates social and environmental concerns into investment decisions. Prisma provides a viable option for investors interested in making money and making a difference.

Financial Projections

Prisma's fiscal year runs July 1 through June 30. The $1.5 million currently being raised in Series "B" round is scheduled to close in July 2001. Therefore, the equity appears in FY2002, beginning July 2001. During fiscal year 2001, the management established a U.S. office to raise funds and promote the company's activities. A central strategy is leveraging equity with additional debt to grow operations. In FY2002, a conservative leverage ratio of less than 1 to 1 is assumed; a similar ratio is also assumed in FY2003.

The $1.5 million of sought equity will fully impact revenue in FY2002. By FY2003, management projects a 10.9 percent return on $2.7 million in equity. By comparison, ROE for other financially self-sufficient microfinance institutions is 6.05 percent according to the MicroBanking Bulletin . Return on assets for these institutions hovers at 3.08 percent; by FY2004 management projects ROA of 4.1 percent. Throughout FY2002 and FY2003, investment in scaling operations is assumed. The goal is to achieve appropriate scale to secure another round of equity investment of $4 million in July of 2003 (beginning of FY2004).

Additional assumptions in the financials include:

  • Interest Earned: As of FY2002, 17 percent net interest margin is assumed matching historical performance.
  • Cost of Capital: 13 percent annual rate, based on current relationships with creditors and management's knowledge of the capital market for socially responsible investment instruments.
  • Loan Officer Capacity: Each loan officer will manage 200 clients, which is low by industry standards.
  • Taxes: Both U.S. and Nicaragua tax liabilities and expenses are included in the projections, assuming a combined rate of 35 percent.

To claim that tangible assets should be measured and valued, while intangibles should not—or could not—is like stating that "things" are valuable, while "ideas" are not.

—Barach Lev, Professor Stern School of Business, New York University

Social Impact

Receiving a Prisma loan generates significant social impact in the following areas:

  • Human Capital Development: Relates to improved economic standing, heightened self-esteem and sense of empowerment, and creation of a stable financial situation for borrowers
  • Community Development: Resulting from borrowers' improved economic standing and ability to give back to the community
  • Corporate Governance: Refers to the equity incentives that Prisma will offer to its employees and its ethic of empowering its staff through inclusive decision-making roles
  • Socially Responsible Market Creation: Speaks to the industry-wide desired outcome of Prisma's activities, which is to be at the forefront of developing viable products to improve the situation of the world's four billion poor people, or the B2-4B revolution

Human Capital Development

Prisma's impact on human capital development results from the positive externalities generated by each dollar lent. The positive externalities start a ripple effect, which leads to improved diet as a result of having a stable cash flow and increased education level for borrowers' children who can stay in school rather than be forced to drop out to increase family income. Improvements to borrowers' lives can be seen in all areas of basic need as a result of having a higher standing of living.

Community Development

In addition to improving individual borrower's economic situation, Prisma's loans also fuel community development, which in essence is the aggregated effect of the individual loans. The loans improve the standing of individual borrowers, thus stabilizing economies at the community level.

The sense of empowerment that comes from economic stability also leads to greater community involvement. This involvement can take many forms, including being involved with public health projects such as latrine building, providing for community members who are sick or in a time of crisis, and skills transfer to other local business owners. These activities and interactions build healthy, sustainable communities.

Corporate Governance

Prisma is offering a balanced, inclusive equity structure that extends to every employee. Senior management is indigenous, except for David Satterthwaite, the CEO and President, who worked in Nicaragua for five years. There is local representation on the board, currently one third of the membership. Equity incentives in Latin America, including ESOPs, are far from the norm, especially for a small company. However, by doing so Prisma is promoting a new business culture of equitable private property ownership in an American company—this is globalization at its most positive.

Creating a commercial market that benefits poor people

According to Jeffrey Ashe, founder of Boston's Working Capital and former Vice-President of Accion International, there are approximately four billion people throughout the developing world without access to affordable credit. Entrepreneurs with excellent skills and incredible ideas are restricted in their opportunity due to lack of financial resources. Even the small amount of money needed as investment capital to start micro-enterprises like weaving baskets and selling them at the local market is beyond the grasp of the majority of the world's poor.

The world's "unbankable" populations have three options:

  • gather limited resources from family and friends
  • borrow from a moneylender at exorbitant rates
  • turn to a microfinance institution like Prisma

Frequently, family and friends cannot generate the necessary capital and the moneylender's rates are too high to be able to pay them back. This being the case, only a loan from an institution like Prisma can result in the successful growth of a new business that may break the cycle of poverty.

According to industry sources, less than $10 billion currently is invested in the worldwide microfinance industry. This does not even scratch the surface towards serving this market. Microcredit is not a panacea solution for social problems. But, it is a useful tool for many to bridge the gap out of poverty and improve their lives. In addition to this activity providing a social return, there are equally compelling market driven motivations to undertake these operations using private capital—providing this service produces financial return.

As with any industry sector, once an example of a successful model is provided, others will enter the field. Following Prisma's lead, microfinance will become a viable commercial market, serving billions of the world's poor.

SROI Methodology and Analysis

While some of Prisma's Social Impact Areas are easily quantifiable, others are best evaluated in terms of qualitative impact analysis. Human Capital Development and Community Economic Development are included in the quantitative analysis using number of dollars lent as the unit of measurement. The qualitative methods analyze aspects of all four impact areas. The following sections outline Prisma's quantitative and qualitative methodology for measuring SROI.

Quantitative Analysis

Current SROI Analysis: In developing its quantitative methodology, Prisma has drawn from models developed by Roberts Endowed Development Fund (REDF), one of the leaders in social enterprise. The use of a social benefit/cost ratio, adjusted for present value, gives a clear sign as to whether the social benefits outweigh the social costs and by what degree. Based on traditional cost/benefit analysis benchmarks, if the ratio is greater than or equal to one, the project should be pursued.

SROI Ratio = Present Value of Social Benefits/Present Value of Social Costs

Social Benefits

Social benefits accounted for in the quantitative analysis of SROI include ripple effects from improving one's financial situations through receiving a loan. These include:

  • Improved health for all family members, leading to higher productivity on a long-term basis
  • Increased education for borrowers' children as they are not required to drop out of school in order to supplement the family's income
  • Increased civic participation as a result of a heightened level of confidence and overall sense of self-worth

These benefits are cited extensively in microfinance literature, including by industry leaders such as FINCA and Accion International. The dollar amounts in the table below are taken from the financial projections for Prisma's loan portfolio. They represent the total number of dollars Prisma expects to lend in each year. (Social benefit and social cost are calculated on a per year basis and then aggregated.) As social benefits are directly correlated to loans, the social benefits are captured in terms of dollars lent to borrowers.

Social Costs

Prisma has always borrowed capital at market rates therefore eliminating the social cost of subsidies or grants often included as social costs in SROI analysis. We have included a small social cost that reflects loan loss due to Prisma's choice to make loans to extremely high-risk individuals. As the company's loan loss has historically been under 1 percent, the estimated social cost per dollar lent of $. 05 used in the model reflects our acknowledgment that in undertaking an expansion strategy into new geographic markets, we run the risk of an increase in the loan loss rate.

Financial Services Company

A benefit/cost ratio of 21 means that for every unit of cost, 21 units of social benefit are derived. As the unit of measurement in this model is dollars, the social return is interpreted as $21 of social benefit for every $1 of social cost incurred. The fact that Prisma's SROI ratio is as high as 21 indicates that in terms of benefit/cost analysis, it is an attractive project, with an extremely high social return on investment.

Future SROI Analysis: Ideally, Prisma would quantify its SROI in terms of the increase in income derived directly from the loan. Measuring income generated specifically from a Prisma loan is complicated in that it would involve measuring a portion of each borrower's increase in income, rather than their total income. This approach would require an in-depth understanding of loan usage and the borrower's expenditures. Prisma proposes to develop this understanding through the qualitative methods described below.

A SROI analysis based on incremental increases in income would enable Prisma to project the increase per month in income over time. The company would then calculate the social net present value of that increase and calculate the appropriate social internal rate of return.

Qualitative Analysis

Prisma has historically collected some of the information described below, such as customer finances, professional activities, age, and gender. Based on its experience, Prisma believes the most effective way to gather information on a going forward basis is to administer questionnaires at the loan's beginning, closing, and annually thereafter (on a voluntary basis), in conjunction with qualitative interviews. These new methods will standardize the process of information gathering and enable Prisma to do more rigorous quantitative analysis, in addition to maintaining a clear sense of its customer base—even as it rapidly expands. Information gathered from customers will include both economic and social indicators.

Economic Indicators As a bank, Prisma must make loans that are fiscally responsible and will be paid back. Therefore, it needs to determine a borrower's financial status before, during, and at the end of the loan. During the loan application process, loan officers will collect information about customers and their finances, including their professional activities, income, historical income, family financial resources, and projected future income. This builds on the information Prisma currently collects and believes is reasonable to collect in the future. Social Indicators Because of the level of trust Prisma staff establishes with customers, they have been consistently helpful in providing information enabling us to track their status. At the time of the loan, social indicators including age, gender, economic condition of borrower, number of family members, and current income are provided. Throughout the term of the loan, it is easy to track the number of employees, business income, and changes in standard of living. This is done implicitly by following the timeliness of loan payments and seeing if loan payments are made on time or late. Receipt of late payments usually indicates a change for the worse in the borrower's status. Prisma will also begin using a standardized method for tracking the ongoing conversations Prisma staff has with customers, through which much information about social indicators is gathered. At the end of the loan, the same information will be formally gathered with an exit questionnaire. Plus, because of its active involvement in the communities it serves and the fact that many customers renew loans for additional working capital, Prisma will be able to track social indicators longitudinally.

Information gathered through loan review, questionnaires, and interviews will be included in Prisma's Annual Report. This will enable our investors to track the SROI and ensure that Prisma stays true to its mandate of doing well by doing good.

If we are looking for one single action which will enable the poor to overcome their poverty, I would focus on credit.

—Dr. Muhammad Yunus

Founder, The Grameen Bank

Target Market— Microfinance in Central America

Market description.

Prisma MicroFinance, Inc., is a U.S. microfinance company with Nicaraguan operations where loans are made to residents in the urban area of capitol, Managua. The loans range in size from U.S. $50-$15,000, and are used for both personal and business purposes. Loans to taxi cab cooperatives account for the larger loans and act as a subsidy for the smaller loans to individuals, primarily women.

Market Size and Trends

Managua is Nicaragua's economic center and has a population of more than 1,000,000. Although Nicaragua's economy is still driven by agriculture, service jobs in the urban areas represent an increasing number of jobs.

This trend holds true throughout Central America. The table below demonstrates the size of the market for international microfinance in Central America's urban areas—the geographic areas that Prisma will target as it expands—expressed in terms of population and GDP. The countries are ranked by size of capital city, beginning with the largest, Guatemala City.

Financial Services Company

Many Central American countries are rebuilding after years of political, social, and economic unrest. Microentrepreneurs play an integral role as economic drivers in this rebuilding and will need access to affordable capital.

Target Customers

Prisma's target customers include:

  • Taxi cab drivers
  • Microentrepreneurs

These target customers look for microfinance institutions (MFIs) that are professional, while still understanding the specific needs of poorer borrowers. They would not have access to banks or traditional financial institutions, so if they decide to take out a loan their options are limited to friends/family, moneylenders, or MFIs. The resources of friends and family are extremely limited, and the exorbitant rates charged by moneylenders (ranging from 360-480 percent APR) make them unattractive in terms of repayment possibilities. (Moneylenders are attractive because there are no conditions to qualify for a loan.) Prisma is in competition with other MFIs.

Market Readiness

Prisma has been in operation for six years. In each of these six years, it has expanded its outreach and refined its operations. With a strong management team in place, Prisma is now ready to significantly expand its operations. It is already the market leader for lending to taxi cab cooperatives and plans to make this its market niche over the next year. This will position Prisma to expand its outreach to other microentrepreneurs and individuals, particularly women.

Strategic Opportunities

Through its experience in the Managua area, Prisma has learned that there is a significant demand for microloans. With its economy continuing to grow, this demand will only increase.

Other capitol cities throughout Central America are experiencing a similar shift toward an expansion of economic activity in the urban centers. The need for microentrepreneurs to access affordable capital will expand along with the urban-based economies. Clearly, there is a demand for reputable MFIs to meet this need and Prisma has established a way to reach this market.

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Making Microfinance More Effective

  • Dean Karlan,
  • Rebecca Mann,
  • Jake Kendall,
  • Rohini Pande,
  • Tavneet Suri,
  • Jonathan Zinman

microfinance company business plan

A look at what actually helps the poor, and what doesn’t.

For the  2.5 billion people who live on less than $2 per day , shocks such as illness, crop failures, livestock deaths, farming-equipment breakdowns and even wedding or funeral expenses can be enough to tip them, their families, or even an entire community below the poverty line. A major challenge for international development efforts is determining which financial tools provide durable buffers against such setbacks.

  • DK Dean Karlan is a professor at Northwestern’s Kellogg School of Management and founder of Innovations for Poverty Action.
  • RM Rebecca Mann is a senior program officer on the Financial Services for the Poor team at the Bill and Melinda Gates Foundation.
  • Jake Kendall is the director of the Digital Financial Services Lab. He worked previously at the Gates Foundation, the World Bank, and in two start-ups in the field of cryptography.
  • RP Rohini Pande is an economist and the Mohammed Kamal Professor of Public Policy at Harvard Kennedy School. She co-directs the  Evidence for Policy Design (EPoD)  Initiative (@EPoDHarvard).
  • TS Tavneet Suri is the Maurice J Strong Career Development Associate Professor of Applied Economics at the MIT Sloan School of Management.
  • JZ Jonathan Zinman is a professor of economics at Dartmouth College.

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Business Plan Guidelines for Microfinance Institutions

This document sets out guidelines for MFIs on developing their business plan.

The business plan should contain an executive summary that should be restricted to two pages. It should also contain necessary information about:

  • Microfinance industry, the institution and its products;
  • Market research and analysis;
  • Marketing plan;
  • Formalization and/or regulatory environment;
  • Operations plan;
  • Management team;
  • Critical risks and assumptions;
  • Financial plan.

The business plan should also contain details about the proposed MFI offering, with details of the desired financing, securities offered, capitalization and use of funds that are being raised.

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Microfinance Bussiness Plan

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A bussiness Plan for a microfinance institution in the slums of East Cairo.

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Microfinance Business Strategic Plan Template

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When it comes to running a successful microfinance business, having a well-defined strategic plan is essential. It's the roadmap that guides your decision-making and helps you stay ahead of the curve in a rapidly changing market.

ClickUp's Microfinance Business Strategic Plan Template is designed to assist microfinance institutions in developing a comprehensive plan that covers all aspects of their operations. With this template, you can:

  • Set clear goals and objectives to drive your business forward
  • Identify and capitalize on growth opportunities within the industry
  • Allocate resources effectively to maximize efficiency and profitability
  • Implement strategies to remain competitive and adapt to market trends

Don't settle for guesswork or outdated methods. Take control of your microfinance business with ClickUp's Strategic Plan Template and pave the way for success.

Benefits of Microfinance Business Strategic Plan Template

Microfinance institutions play a crucial role in empowering individuals and communities by providing access to financial services. The Microfinance Business Strategic Plan Template can help these institutions:

  • Define and align their mission, vision, and values to guide decision-making
  • Identify target markets and develop strategies to reach and serve them effectively
  • Set clear goals and objectives to measure success and track progress
  • Allocate resources efficiently to maximize impact and sustainability
  • Evaluate and mitigate risks to ensure the long-term viability of the institution
  • Foster innovation and adaptability to stay ahead in a rapidly changing industry

Main Elements of Microfinance Business Strategic Plan Template

ClickUp's Microfinance Business Strategic Plan template is designed to help you streamline your business strategy and achieve your goals. Here are the main elements of this template:

  • Custom Statuses: Track the progress of your strategic initiatives with 5 different statuses, including Cancelled, Complete, In Progress, On Hold, and To Do.
  • Custom Fields: Utilize 8 custom fields such as Duration Days, Impact, Progress, and Team Members to capture and analyze crucial information for each initiative.
  • Custom Views: Access 6 different views, including Progress, Gantt, Workload, Timeline, Initiatives, and Getting Started Guide, to visualize and manage your strategic plan efficiently.
  • Project Management: Leverage ClickUp's powerful features like Gantt chart, Workload view, and Timeline view to effectively plan, assign tasks, monitor progress, and collaborate with your team.

How to Use Strategic Plan for Microfinance Business

If you're looking to create a strategic plan for your microfinance business, follow these six steps to effectively use the Microfinance Business Strategic Plan Template in ClickUp:

1. Define your vision and mission

Start by clearly defining the vision and mission of your microfinance business. What is the ultimate goal you want to achieve? What values and principles guide your operations? This will serve as the foundation for your strategic plan.

Use the Goals feature in ClickUp to create specific, measurable, and time-bound objectives that align with your vision and mission.

2. Assess the market and competition

Conduct a thorough analysis of the microfinance market and identify your main competitors. What are their strengths and weaknesses? How do they differentiate themselves? Understanding the market landscape will help you identify opportunities and develop strategies to stay ahead.

Utilize the Gantt chart feature in ClickUp to create a timeline for your market research and competitor analysis.

3. Set strategic goals and objectives

Based on your market analysis and understanding of your business, set strategic goals and objectives that will guide your microfinance operations. These goals should be specific, measurable, attainable, relevant, and time-bound (SMART).

Use the Board view in ClickUp to create cards for each strategic goal and break them down into smaller tasks.

4. Develop action plans

Once you have your goals and objectives in place, develop action plans to achieve them. Break down each goal into actionable steps and assign responsibilities to team members. Set clear deadlines and milestones to track progress.

Utilize the Automations feature in ClickUp to automate repetitive tasks and streamline your action plans.

5. Monitor and evaluate progress

Regularly monitor and evaluate the progress of your strategic plan. Are you on track to achieve your goals? Are there any obstacles or challenges that need to be addressed? Stay proactive and make adjustments as necessary to ensure success.

Use the Dashboards feature in ClickUp to track key performance indicators (KPIs) and visualize the progress of your strategic plan.

6. Review and adapt

Periodically review your strategic plan to ensure its effectiveness. As your microfinance business evolves, you may need to adapt your strategies to changing market conditions or new opportunities. Stay agile and open to feedback from your team and stakeholders.

Set recurring tasks in ClickUp to regularly review and update your strategic plan, ensuring its relevance and alignment with your business goals.

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Get Started with ClickUp’s Microfinance Business Strategic Plan Template

Metalworking companies can use this Microfinance Business Strategic Plan Template to align their goals and objectives, allocate resources effectively, and implement strategies to remain competitive in the market.

First, hit “Add Template” to sign up for ClickUp and add the template to your Workspace. Make sure you designate which Space or location in your Workspace you’d like this template applied.

Next, invite relevant members or guests to your Workspace to start collaborating.

Now you can take advantage of the full potential of this template to create a strategic plan for your microfinance business:

  • Use the Progress View to track the progress of each strategic initiative and ensure that tasks are completed on time
  • The Gantt View will help you visualize your strategic plan on a timeline and identify dependencies between tasks
  • Use the Workload View to balance workloads across team members and ensure that resources are allocated effectively
  • The Timeline View will provide a high-level overview of your strategic plan and help you identify milestones and deadlines
  • Use the Initiatives View to break down your strategic plan into specific initiatives and assign tasks to team members
  • The Getting Started Guide View will provide you with step-by-step instructions on how to use the template and get started with your strategic planning process
  • Organize tasks into five different statuses: Cancelled, Complete, In Progress, On Hold, To Do, to keep track of progress
  • Update statuses as you progress through tasks to keep team members informed of progress
  • Monitor and analyze tasks to ensure maximum productivity and the successful implementation of your strategic plan.

Related Templates

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US Microfinance Company’s Strategic Business Plan Essay

Executive summary, introduction, company description, products and services, market analysis, sales and revenue, organization.

In the US, 15.1% of the total population lived under poverty, and the total number of people living under the poverty line was estimated to be 46.2 million (US Census Bureau, 2013). The poverty rate in the US is the highest since 1965. Low-income families in the US were 10.4 million in 2011, which is 31.2% of the working families in the country (US Census Bureau, 2013). The richest 20% of the population took away 48% of the total income, while the lowest 20% took only 5% of the income in the US (US Census Bureau, 2013). Therefore, a large share of 47% of the income is present in the US, which goes to the middle 60% of the population. A comparison of the US savings with that of China showed that in 2005 the Chinese saved 32% of their income while an average American saved only 2% of his income (Jin, 2012). This discrepancy provided a huge opportunity to induce potential earners to invest, as recent trends have shown that there has been a considerable fall in the spending and consumption pattern of Americans. Therefore, many Americans with low savings and low income can save a good amount of their income for retirement. As a rule of thumb, anybody above the poverty line can try to save 10% of their income. Assuming this, we propose the setting up of the micro-investment company.

Prism Microfinance Investment Service is a microfinance company that helps in planning and investment to small individual investors. The aim of the company is to provide access to finance and investment even to the poorest section of society. This service will help the low-income economic class to save as well as invest their money and expect good returns. Therefore, the business will operate in the US, catering to the urban poor. The reason for undertaking this business plan is to help the increasing number of urban poor in the US to invest, for they usually do not get an opportunity to invest with the bigger banks or financial service providers. The main aim of the company would be to help low-income Americans to save as much they can on lucratively high return investment plans and provide financial products that would help them save in the short term, and invest in small amounts as the economy hit with a recession the consumption in the US economy reduced considerably, increasing the disposable income with the average American, and hence greater room for savings. The aim of the company would be to induce the lower income group people to invest in more lucrative investment opportunities, which they are unable to avail for high return investment plans usually tend to charge higher entry load.

The company will be an online microfinance company, providing loans to low-income group people as well as help them invest their small savings in fetching the maximum possible return. The loans will be forwarded to those small entrepreneurs hailing from low-income families who do not have the opportunity to lend capital from big investors. Further, the company will also help provide small investors with information and expertise as to how they can save their money with little risk and an adequate return.

The business plan will provide an overview of the microfinance market both from the perspective of the lender and the investment and savings service and provide an essential overview of the market of such an industry in a developed country like the US. Apart from this, the business plan provides a marketing and financial plan to show the viability of such a business in the US.

This paper is a business plan to start-up a microfinance company in the US. The paper presents all the requirements for setting a financial service business in the US and also presents the need to set up such a business. As American poverty, especially in the urban areas, has been increasing, and more and more people are found to live without any banking facility, there emerges a need to cater to the financial need of the poor. The inequality of income distribution and the availability of proper banking facilities to these households are scant even in a developed country like the US. This discrepancy provides a great opportunity to induce potential earners to invest, as recent trends have shown that there has been a considerable fall in the spending and consumption pattern of Americans. Therefore, many Americans with low savings and low income can save a good amount of their income for retirement. As a rule of thumb, anybody above the poverty line can try to save 10% of their income. Assuming this, we propose the setting up of the micro-investment company. Our company addresses this need.

Our microfinance company is a for-profit social organization that looks both at the business as well as the social welfare point of view of the business. Many microfinance companies operate as a profit-making venture; they have become successful ventures. Our company aims to be a part of those esteemed organizations.

The paper presents the business plant of the marketing plan, operational and organizational plan, the financial plan, and the sales and revenue forecast for the organization. The introduction presents the rationale of making such an organization, and then an overview of the organization is given in an organizational overview. The market analysis presents secondary research on the microfinance market in the US and the prospects, risks, and opportunities that the market holds for our company. Then the paper presents the financial performance of the company as expected for the first 12 months and then for five years. It also presents a break-even analysis of the company. In the end, the paper presents the exit strategy.

In the US, 15.1% of the total population lived under poverty, and the total number of people living under the poverty line was estimated to be 46.2 million (US Census Bureau, 2013). The poverty rate in the US is the highest since 1965. Low-income families in the US were 10.4 million in 2011, which is 31.2% of the working families in the country (US Census Bureau, 2013). The richest 20% of the population took away 48% of the total income, while the lowest 20% took only 5% of the income in the US (US Census Bureau, 2013). Therefore, a large share of 47% of the income is present in the US, which goes to the middle 60% of the population. This discrepancy provided a huge opportunity to induce potential earners to invest, as recent trends have shown that there has been a considerable fall in the spending and consumption pattern of Americans. Therefore, many Americans with low savings and low income can save a good amount of their income for retirement. As a rule of thumb, anybody above the poverty line can try to save 10% of their income. Assuming this, we propose the setting up of a microfinance company targeting the urban poor in the US.

Prism Microfinance Investment Service is a microfinance company that helps in planning and investment to small individual investors. The aim of the company is to provide access to finance and investment even to the poorest section of society. This service will help the low-income economic class to save as well as invest their money and expect good returns. Therefore, the business will operate in the US, catering to the urban poor. The main aim of the company would be to help low-income Americans to save as much they can on lucratively high return investment plans and provide financial products that would help them save in the short term, and invest in small amounts. As the economy hit with a recession, the consumption in the US economy reduced considerably, increasing the disposable income with the average American, and hence greater room for savings. The aim of the company would be to help people from the lower-income groups to invest in more lucrative investment opportunities, which are unavailable to them.

Mission Statement

The mission of the company is to avail of finance to small start-up entrepreneurs from low-income families and help low-income families to invest in the right place to fetch the highest possible in the urban areas of the United States of America.

Company goals and objectives

The goal of the company to reach out to the underprivileged section of urban America and help them to invest their hard-earned money at the right place as well as help them to start-up their businesses.

The objective of the company would be to attain the maximum number of customers invest with us, through our daily investment scheme of a very small amount. Further, we would like to have more than a thousand people investing with us in the first year and invest in more than hundreds of small-start-ups.

Business philosophy

The most important aspect of the business is our philosophy to help those who are unable to avail of any other form of financial services. Low-income constrains their living standards greatly, and they find it very difficult to save or invest. We intend to provide extensive service to the low-income urban population to help them invest a small amount of their income and turn it into lucrative savings. The company is an online microfinance company providing loans to low-income group people as well as help them invest their small savings in fetching the maximum possible return. The loans will be forwarded to those small entrepreneurs hailing from low-income families who do not have the opportunity to lend capital from big investors. Further, the company will also help provide small investors with information and expertise as to how they can save their money with little risk and an adequate return.

To us, the most important aspect of our business is to reach out to the underprivileged and help them to start up their own business. Further, doing our work with integrity is the utmost priority of our business so that our clients always receive the best possible service.

Our target market would be the urban poor in America. In the US, 15.1% of the total population lived under poverty, and the total number of people living under the poverty line was estimated to be 46.2 million (US Census Bureau, 2013). The poverty rate in the US is the highest since 1965. Low-income families in the US were 10.4 million in 2011, which is 31.2% of the working families in the country (US Census Bureau, 2013). The richest 20% of the population took away 48% of the total income, while the lowest 20% took only 5% of the income in the US (US Census Bureau, 2013). Therefore, a large share of 47% of the income is present in the US, which goes to the middle 60% of the population. Our target is that the bottom 60 percent of the population who are, many a time, unable to avail of the loan or investment schemes offered by the big financial houses.

The microfinance industry is nascent in the US, though it has been very successful in developing countries like India or Bangladesh. It is highly competitive; however, in the US, the potential for this service is huge. Historically, the US has experienced small non-bank lenders since the early seventies. In 2011 there were 962 community development financial institutes operated in the US. However, a very small number of these institutes offered micro-loans to small entrepreneurs (Responsibility, 2013). The global microfinance industry posted a growth of 20% in 2012, and it is expected that the industry will continue to grow (Responsibility, 2013). The expected growth rate of the industry is very high. The demand for the products is also high, as in the US. There are a large number of the population who are unbanked and do not have access to proper credit or savings facilities. 26% of the poorest 20% of America and 15% of the total population are unbanked, i.e., they do not have proper banking facilities and have to rely on cash transactions of more expensive means of a credit (The Economist, 2013).

Further, we believe that the industry will grow phenomenally with its online presence and would boost the profits of the company further. In the long run, the industry is expected to gain further through mergers and acquisitions and become as strong as the banking industry. The company will operate with the greatest efficiency, and when the right opportunity arrives would take the plunge to transform its business process to suit the growing needs of microfinance.

The important strength of the company is its target market and the yet unexploited market, for there are still more than 2 million Americans who belong to the low-income groups in the urban areas who are unbanked and have to rely on expensive options like payday loans. The core competency of the company would be its model to help the poorest of the poor to save, help the aging population of America to save and manage their money to live a hassle-free retired life, and start-up entrepreneurs who have no capital to start with. Helping these three groups of underprivileged clients, the company will gain its growth.

Success Factors

The factors that would define the success of our company are –

  • There is an increasing requirement of a microfinance company in the US, where a large group of people lives around the poverty line.
  • The unavailability of the banking or other financial services to a large number of urban populations points to the need for a financial institution that caters to the gap.
  • The need to save individuals but the inability to save monthly is a problem that most of the low-income people face. As our financial service would provide savings facilities for individuals daily, it would become easier for anybody to save the smallest amount that they can afford.
  • Giving high returns at the least possible risk.
  • Loans to small start-ups that are unable to fetch capital from conventional means.

Strength of the Company

The main competitive strength of our company would be accessibility. Loans would be processed even for very small amounts like $10, and payment mode would be flexible. The interest rates would be best in the market. Further for those who would like to save or invest with us, would get assured interest on their savings.

The experience that we would require is to understand the market need and financial lending and investment market. The company will be started as a sole proprietorship. We choose this form of business as it would be easier to mold the requirements and make the product offerings of the company to suit the needs of the target customers.

The products that we intend to begin with are ticket loans, deposits or savings, and investments.

Loans to Small Start-up entrepreneurs

The main offering will be to start-up businesses. Entrepreneurs from low-income families do not have access to bank loans to start up their business. Our company will provide loans in small amounts to such start-ups. The loans would range from $1000 to $10,000 for start-ups. The interest charged on them would be best in the industry. The loan cycle would be shorter from 1 to 2 years duration.

The loans given in this category are to businesses and are

  • Start-up loan
  • Working capital loan
  • Business Expansion loans

Loans to Individuals

There are many people in the low-income group who cannot access proper medical facilities or education due to the unavailability of medical insurance or educational loans. Our company will help those who need loans for medical, insurance, or other such necessary these loans will be provided from an amount of $500 to $5000. The medical loans would have a shorter duration from 1 to 2 years, while the education loans will have a slightly higher duration from 3 to 4 years.

In this category the loans that are given are

  • Emergency loans
  • Medical loans
  • Educational loans
  • Home improvement
  • Consumer loans
  • Fixed asset loans

Savings Options

Our microfinance company will provide consumers will opt to save their money on a daily, weekly, bi-weekly, or monthly basis with the assurance of competitive risk-free returns. Many people, as they do not have a banking facility, they do not have the option to save their money. Keeping their money with us will not only keep it safe but also fetch interest on their savings. The longer the period they keep their money, the higher would be returning that they fetch. The moderately high interest that we give on a small amount of savings would help us to retain customers.

Competitive Advantage

The factors that would provide a competitive advantage to our business is the accessibility of the low-income households to a credit and savings facility without going through the hassle of too much paperwork and regulations. Most of the unbanked people do not have access to loans or savings options as they are thought non-creditworthy. The hassle to go through the paper works makes it almost impossible for many to get access to the financial schemes offered by banks or other financial institutions. The competitive advantage that we would have over and above others is our accessibility and fast delivery of service.

Microfinance Industry

Target market.

The microfinance industry in the US had started with the community development finance institutions (CDFIs) in the 1970s (CGAP, 2011). However, the concept of “microfinance emerged in the US only in 2010 (see figure 1). The demand for the products of microfinance services in the US is high due to its increasing rate of poverty. In 2010, people living under the poverty line in the US increased to 46.2 million (New York Times, 2011). Further, due to the recessionary pressure, the median income of households has shown a 7% decline to $49,445 in 2010 (New York Times, 2011).

Percentage of people in the US under the poverty line, Source: Census Bureau of the US (New York Times, 2011)

Data suggests that 8.2% of American households are unbanked, and the number of adults who have no banking facility closes to 10 million, which has increased from the 2009 survey (FDIC, 2012). The research also shows that 20.1% of the households are under-banked, and 29.3% of households do not have a savings account, and 10% have no checking account (FDIC, 2012). Therefore, there is a large market, which is expected to increase due to the deteriorating recessionary pressure. Therefore, the company has access to a large number of people who need microfinance to help them come out of the credit crunch that they face.

Another important statistic, which boosts the need for a microfinance organization, is the high number of businesses (88%), which can be categorized as micro-businesses (CGAP, 2011). The reason for such a large number of people remaining unbanked is due to the lack of the minimum fund required to open a bank account or lack of documentation or poor credit history. This makes the families turn to the AFS providers whose transactions in the US are $320 billion annually (CGAP, 2011). However, as microfinance institutes, these problems can be solved very easily. This shows the need for a microfinance service in the US to cater to this segment of society. Therefore, the total size of the market that we are aiming at is 10 million households in the US.

Presently there are other players in the market. However, microfinance companies have different objectives and product offerings. We intend to capture at least 10% of the market in the first two years of our operation.

Growth Potential

The global microfinance industry is growing at a rate of 3% (Lahaye et al., 2012).

The alternate non-banking finances, like pre-paid cards and the present financial institutes in the microfinance sector, have grown by 19% (FDIC, 2013). The market is expected to grow further, as the recessionary pressure will exert more pressure on the living standard of the low-income households in America would need credit. Recent research shows that microfinance institutes have increased by 45% since 2010 (Brom, 2012).

Threats to the Business

The threats imminent on the business are government regulation, which may cause interference in the sector with subsidized loans, which may reduce demand for our products. Lack of government control over the sector can be a deteriorating factor in our organization, as this may lead to biased judgment towards the sector. Another possible threat that the company may face is over-indebtedness and high portfolio risk (Brom, 2012). As there is, a high risk of competition from different sectors leads may include the organization in the microfinance sector apprehensive of their performance. However, we are confident we will be able to handle the rising competitive pressure from the banks and other microfinance institutions.

An analysis of the industry using Porter’s five forces model shows that the entry barriers for the industry are low. As there is no government regulation regarding the control of the entry of new entrants in the industry, a high growth prospect always allures new companies to enter the market and make it more competitive.

Porter’s Five Forces Model

The threat of the existing companies is also high as these companies have already created a base in the market, and enjoy a greater market presence and share. They would use their first mover’s advantage to hamper the business of a new company in the sector.

The bargaining power of the customers is low, which is a good sign as they cannot dictate the price at which the products are to be sold in the market. As in the case of microfinance companies, they cannot dictate the rates at which they are willing to take the loan or the return of interest they expect from their invested money.

The concern regarding the cost of funding is deep because, for a financial institute to give out loans, one requires large capital. The people who supply the capital tot eh business are the suppliers. As there are few suppliers in the market, they have great power over the sector and can dictate their terms. Though this problem was not apparent, this may become a threat later, as has been observed in other countries:

In Nicaragua, several MFIs plan to form a consortium that can be listed on the stock market as a strategy to reduce dependence on foreign funding. In Ecuador, MFIs are planning to source local funds through bond issues or securitization. Several respondents mentioned that MFIs that can mobilize savings would have an advantage over those which cannot. (Brom, 2012, p.7)

Recessionary pressure and the economic shocks may become a threat to the company if the proper mechanism to face them is not put to place.

The target customers are those individuals with annual income less than $35000, which comprises 35% of the population, and the household income less than $450000, which comprises 40% of the American households (American Community Survey, 2012). 17% of the total population has no health coverage; therefore, they may require loans for medical expenses (American Community Survey, 2012).

The age of the targeted clients is based on the products and their insurance status. For instance, the medical loan is targeted specifically to elderly individuals who do not have medical insurance and have to rely on high-interest loans to cover their bills. Therefore, the age of this target client is above 55 years.

The education loans are targeted to the younger generations who have good grades and education records but no money to enter college or any other educational facility. Therefore, the target age for this product is 18 to 25 years.

Further, for the new start-up business, we will specifically help low-income families. Their age has to be above 18 and below 35 years.

Therefore, for most of the products, the age group targeted is above 18 and below 35 years, except for one product where the target group is over 55 years.

As we aim to cater to the urban poor, the location of our clients would be the urban poor population beginning with New York and Chicago. We will not cater to the rural areas.

There are no specific educational barriers to get our loans, except for those who want to start-up a business, and those seeking educational loans will have to show a good academic record and a High School certificate.

The initial size of the firm will be small, with only 50 employees operating in the office. However, we will employ hundreds of agents who would reach out to our clients. The agent’s payment would be commission based.

Competition

Microfinance companies face a high degree of competition from other microfinance companies and other financial institutions like banks, mutual funds, insurance agencies, etc. competition is both from the substitutes of the products that we offer as well as from similar competing organizations. The leader in the microfinance in the US is Accion. However, one advantage that we have over Accion is that it concentrates solely on lending money; however, our product offerings deal with savings, educational loans, and other social activities. The competitor analysis is done in the following table.

Table 1 : Competitor Analysis

The differences between our organization and the three major organizations operating in the microfinance industry are presented in table 1. The table shows that competitors operate mostly internationally. US Accion operates in certain parts of the US, like Miami in Florida, Atlanta, Boston, and New York. All these are mostly urban areas and where target the same group of people as we intend to do. Opportunity Fund operates internationally. The revenue earned is highest by Opportunity Fund that amounts to $7,567, 573 (Opportunity Fund, 2012), and for US Accion, it was $6,194,039 (US Accion, 2012).

A twelve-month sales forecast has been presented in table 7 (Appendix), which shows that the sales are expected to increase constantly over the 12 months for the company. The sales forecast shows a definitive increase in the revenues earned by the company as there will be the inclusion of greater clientele in the loans and savings divisions of the company. Our expectations for the first year are realistic, and we have aimed at not more than 2000 clients in the whole year. These clients will have requirements at various rates, and therefore, an average expected estimation is provided in the table.

The Services

The main function of the teams would be to produce tailor-made services for our clients. Not two people have the same requirement. Their financial conditions and their requirements may vary so much that a completely new product would be produced at the time of delivering it. We understand that difference in the needs of our clients and would endeavor to satisfy their specific requirements.

Operations

The location of the company would be in urban areas of the US. Therefore, we will be headquartered in New York City. This will be beneficial in two ways – 1) we will be close to our potential investors, and 2) we will be close to our potential clients. Initially, we intend to start our operations in two cities New York and Chicago. Therefore, we will require a decent size office in New York to accommodate 30-40 employees and a smaller city office in Chicago with a capacity to accommodate just ten employees. Apart from this, we will hire hundred of agents in both the cities to reach out to the clients, and they will be paid on commission. The initial cost to set up all these would be around $30,000-$50,000.

Another important task would be identifying the investors who would be willing to participate with us in our social, financial endeavor. We will have to get a license from the Federal Reserve and the Small business association to start our business.

The financial statement (see Appendix, Table 2) shows the balance sheet of our company. In the first year, the balance sheet is expected to look this way. The balance sheet is strong in the first year.

Figure 5 : Investments

There are three investors whom we have identified interested in investing in our project. They will help us to set up as well as finance our loaning division. Further, the company has already started paying back the investors every month and will complete the payments by 2015.

Figure 6 : Property

The property has been purchased on the company accounts. Therefore, the main expense that the company had incurred was the amount of money spent on the purchase of the real estate to set up the office. However, our investors financed 70% of the cost.

The main component in the balance sheet of a financial service organization is the cash equivalents. This is so because they have to deal in cash, and therefore having a large amount of cash in hand is essential. In this respect, our company has a strong cash flow, from our funding as well as funding from our investors. The assets of the company are strong enough to start a new business where we can immediately start giving small loans to the clients as well as rely on our investors to give larger loan amounts.

Start-up Expenses and Capitalization

The start-up cost of our company is presented in table 3 of the Appendix. The start-up cost demonstrates that there would be three sources of investments for the company, which would amount to 90 thousand dollars. Loans would be taken from two banks, amounting to $1000 thousand. The initial capital that we have in the gathered is to start-up the business as well as has enough capital to start lending. Further, our target would be gathering as many savings accounts possible from our target customers to roll our business.

In our business, cash is the most important product that we offer to our clients. Therefore, the cash flow needs to be uninterrupted all the time. Keeping this in mind, we have taken loans from two banks, and three investors want to participate in our business with investments amounting to $90 thousand. Therefore, with the cash that we have and the additional cash that is pumped into the business through bank loans and investor’s cash, we have a healthy cash flow for the start-up of the business.

Financial Plan

The financial plan of the business is presented through the 12-month profit and loss projection and the break-even analysis. These demonstrate that the company is expected to operate in a very lucrative manner over the first 12 months period. The company is expected to break even when it has done business with 3400 clients, and the company is expected to attain a positive balance sheet in the first years of its operations. The details of the financials are presented in Appendix tables 4 and 5.

The five-year profit projection shows that our business is expected to grow at an average rate of 19%, where the growth of the company is expected to rise every year (see table 6 in Appendix).

As this is a financial service company, the exit strategy has to be very strong. The exit strategy of the company would either merge with another company or sell the company to another potential buyer. Development of partnerships with other companies or creating local linkages may also help the company to rejuvenate. In case the company is incurring continuous losses, we will have to announce solvency and take at least a year to close our accounts.

Further, the company will have a constant surveillance system to gauge the performance of the company, which would indicate any prior indication of the need to exit the business. A proper system to monitor growth and threats to the business would help the company to make the right decision in case exit becomes necessary. To exit the market, we propose that we would either sell our business to the competitors or any other institutions that are posing a threat to our business to have the employees and our clients a base where they can fall back.

AMERICAN COMMUNITY SURVEY (2012) 2011 American Community Survey 1-Year Estimates . Web.

BROM, K. (2012) Market Outlook 2012: Perspective of Microfinance Association Leaders . Web.

CGAP (2011) Unbanked in America . Web.

FDIC (2012) 2011 FDIC National Survey of Unbanked and Underbanked Households . Web.

FDIC (2013) FDIC – Statistics on Depository Institutions Report . Web.

JIN, K. (2012) Why Are Savings Patterns So Different? Web.

LAHAYE, E., RIZVANOLLI, R. & DASHI, E. (2012) Current Trends in Cross-Border Funding for Microfi nance . Web.

NEW YORK TIMES (2011) Income and Poverty Rate at 1990s Levels . Web.

OPPORTUNITY FUND (2012) Annual Report 2012 . Web.

RESPONSIBILITY (2013) Microfinance Market Outlook 2013 . Web.

THE ECONOMIST (2013) Margin calls . Web.

US ACCION (2012) Annual Report 2012 . Web.

US CENSUS BUREAU (2013) Poverty . Web.

Table 2 : Expected financial Statement for Year 1

Table 3 : Start-up cost

Table 4 : Break Even Analysis

Table 5 : 12 month Profit and Loss Projection

Table 6 : Five Year Profit Projection

Table 7 : 12 month sales forecast

  • Chicago (A-D)
  • Chicago (N-B)

IvyPanda. (2024, January 21). US Microfinance Company's Strategic Business Plan. https://ivypanda.com/essays/us-microfinance-companys-strategic-business-plan/

"US Microfinance Company's Strategic Business Plan." IvyPanda , 21 Jan. 2024, ivypanda.com/essays/us-microfinance-companys-strategic-business-plan/.

IvyPanda . (2024) 'US Microfinance Company's Strategic Business Plan'. 21 January.

IvyPanda . 2024. "US Microfinance Company's Strategic Business Plan." January 21, 2024. https://ivypanda.com/essays/us-microfinance-companys-strategic-business-plan/.

1. IvyPanda . "US Microfinance Company's Strategic Business Plan." January 21, 2024. https://ivypanda.com/essays/us-microfinance-companys-strategic-business-plan/.

Bibliography

IvyPanda . "US Microfinance Company's Strategic Business Plan." January 21, 2024. https://ivypanda.com/essays/us-microfinance-companys-strategic-business-plan/.

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Reddit hasn’t turned a profit in nearly 20 years, but it just filed to go public anyway

Clare Duffy

Reddit, the message board site known for its chronically online userbase and for originating much internet discourse, filed for its long-anticipated initial public offering on Thursday.

The move would make Reddit the first major social media company to go public since Snapchat in 2017 . And the offering will come with a twist that could allow some of the most fervent of its more than 70 million daily users to buy shares in the IPO — an opportunity typically reserved for institutional investors.

Reddit said it will reserve shares for top users to buy, based on their so-called “karma,” a term the platform uses to measure its users’ contributions and reputation on the site.

“Our users have a deep sense of ownership over the communities they create on Reddit. We want this sense of ownership to be reflected in real ownership — for our users to be our owners,” co-founder and CEO Steve Huffman said in a letter in Thursday’s filing. “Becoming a public company makes this possible.”

Reddit’s filing comes amid a  slump in the wider IPO market, as Wall Street hopes that a blockbuster listing could help revive dealmaking.

The San Francisco company filed to list on the New York Stock Exchange under the ticker symbol “RDDT,” according to a Securities and Exchange Commission filing . The filing comes nearly three years after Reddit hired its first chief financial officer, and executives, including co-founder and CEO Steve Huffman, began publicly discussing the possibility of an IPO to further elevate the company’s profile.

Now, Reddit — which is not yet profitable — says it seeks to grow its business through advertising, more e-commerce offerings and by licensing its data to other companies to train their artificial intelligence models.

“Our work to make Reddit faster, easier to use, easier to moderate and govern, and simpler to navigate and find relevant communities is driving growth today and will continue to be our focus into the future,” Huffman said.

Reddit was sold to media company Condé Nast in 2006 by its co-founders Alexis Ohanian , who left the company in 2020, and Huffman, who now owns 3.3% of the company. According to the IPO filing, the company’s largest shareholders are now Advance Publications (30.1%), which owns Condé Nast, Chinese tech company Tencent (11%) and OpenAI CEO Sam Altman (8.7%).

History of the ‘Front Page of the Internet’

Reddit, which has called itself the “front page of the internet,” is a social media veteran: the company started in 2005, the year that college roommates Huffman and Ohanian graduated from the University of Virginia. It was the same year that TheFacebook became Facebook, YouTube uploaded its first video and before the launch of Twitter (now called X).

In its 18 years as an online social hub, Reddit has seen enormous growth, occasional controversy and even market-shifting stunts.

The platform is known for its “subreddits,” which are unique, user-generated discussion forums where users form communities on various topics ranging from sports to politics to religion and everything in between. Reddit users often post anonymously in these forums, discussing everything from memes to major news events.

Steve Huffman, CEO of Reddit attends Variety & Reddit An Evening With Future Makers at Wynn Las Vegas on January 05, 2023 in Las Vegas, Nevada.

In 2021, Reddit caused mass market upheaval when a community of day traders on the platform called WallStreetBets began buying up shares of GameStop in an effort to hurt hedge funds that bet against the stock. Many of the Redditors who joined the frenzy late ended up with huge losses.

Still, the incident helped draw attention to the power of Reddit communities. In the wake of the WallStreetBets debacle, Reddit announced  a new, $250 million funding round that valued the company at $6 billion. It also announced plans at the time to double its workforce and expand into international markets.

Earlier this year, Reddit was again drawn into the spotlight by a mass user protest that resulted in thousands of the platform’s most popular subreddits going dark for weeks over a plan to charge some third-party apps millions of dollars in fees to continue accessing the platform. The protest eventually fizzled out after Reddit threatened to eject forum moderators if they continued the blackout.

Reddit users to become owners

Thursday’s filing offers the most detailed look yet at the state of Reddit’s business, which seeks to grow beyond the traditional ad-supported model upon which most social platforms continue to heavily rely.

Reddit says it averaged more than 73 million daily active users in the final three months of 2023, up from the 52 million daily active users it reported in 2021. The company also said in its filing it hosted more than 100,000 active communities on the site in December 2023.

The company’s sales in 2023 reached $804 million, up 21% from $666.7 million in 2022. Reddit reported a net loss of $90.8 million in 2023, a narrower loss than the $158.6 million loss it netted in 2022.

And while Reddit said it expects its total addressable market in advertising to grow to $1.4 trillion by 2027, it also acknowledged in the filing’s risk factors disclosure that it has “a history of net losses and we may not be able to achieve or maintain profitability in the future.”

Reddit also said it plans to grow revenue by selling data to AI firms and by focusing on the “user economy.” The filing details a future plan to boost e-commerce on the site and improve user earnings through the Reddit Contributor Program and Reddit Collectible Avatars Creators Programs. These systems allow users to earn monetary gifts and rewards of which the company can take a portion, the filing said.

Reddit on Thursday also announced an expanded partnership with Google that includes access to Reddit’s data to train Google’s AI models and better display Reddit content across Google platforms.

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Moscow International Business Centre (MIBC)

The Moscow International Business Centre (MIBC) is an ambitious engineering project in the centre of Moscow. The site is

Estimated Investment

$12 billion

Construction Started

Moscow, Russia

Project Type

Business complex (city within a city)

CITY JSC, Moscow City Government

microfinance company business plan

The Moscow International Business Centre (MIBC) is an ambitious engineering project in the centre of Moscow. The site is on an old urban area near the river embankment. The goal of the project is to create a new business district within the city.

The whole complex is to be built on a 100ha site (divided into 30 plots) designated for new development on the Krasnopresnenskaya embankment. The management company for the project is CITY Joint Stock Company (CITY JSC), a company first set up in 1992 as a collaboration between the Russian government and private investors.

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The project was first launched in the early 1990s but has been stalled for much of the last 10 years due to a lack of investment. In 2003 the project started to attract investment again and has been gaining momentum ever since.

PLOT 1: BAGRATION BRIDGE AND TOWER 2000 OFFICE COMPLEX

The first major building constructed in the MIBC project on Plot 1 was the Bagration Bridge (pedestrian bridge) and mall, completed in 1999. The second project was the Tower 2000 office complex, a multi-use business complex begun in 1996 and completed in 2001. The building is 106m high and has 30 storeys above ground and four storeys below. The total floor area of the complex is 60,000m².

The underground area contains parking garages, restaurants, retail areas and a fitness centre. Floors 3–15 and 17–26 are business offices while floors 8 and 27 have a media centre, large exhibition hall and piano bar.

The business areas are served by structured cable network, fibre optic cable, satellite broadcasting, Wi Fi and ADSL Internet access, automatic digital telephone exchange with integration of services, local broadcasting system, municipal broadcasting network, electric timing system, data collection and processing system, audio and video systems, simultaneous interpreting system, conference system, video projection system and security systems including biometric access control and a monitoring system.

The tower also has a central air conditioning system, auxiliary exhaust ventilation system, cooler and heat supply systems, Uninterruptible Power Supply system (UPS), automatic fire security system, automatic volumetric fire-fighting system, sprinkler system and automatic smoke removal system.

The general contractor for the tower was Promstroytechnologia-M Company Ltd. The facade of the tower, which is made of glass and structured concrete, was constructed by Transwall Technology. The tower is equipped with 17 computerised rapid elevators, supplied and installed by Schindler Aufzuege AG, and an outer panoramic elevator, supplied and installed by Kone Lifts. The exterior lighting equipment was supplied and installed by Thorn.

PLOTS 2 AND 3: MOSCOW WEDDING PALACE AND CITY SQUARE

The sites designated by plots 2 and 3 are now to be developed as the Moscow Wedding Palace and City Square. This will include a city square, an underground retail complex and a 14 storey multipurpose complex, which will include the Wedding Palace, banquet halls, restaurants, shops and a hotel.

The developer is Capital City Developments. The architect is Mosproject – 2. The construction started in 2005 and is scheduled to be complete by the end of 2007.

PLOT 4: AQUAPARK

The Aquapark leisure complex was started in 2002 and was completed in 2005. The site occupies a 1.74ha area adjacent to Krasnopresnenskaya embankment. It includes:

  • Complex of swimming pools, water mountains and leisure attractions, restaurants and cafes and retail areas (24,352m²)
  • Five-star, 30-storey hotel complex (54,640m²) built on a six-storey podium containing retail areas, restaurants and nightclubs
  • Parking to accommodate 425 vehicles (13,050m²)
  • The aqua park will be connected with a mooring on the Moscva River

The developer of the complex was Aqua-City Palas Company Ltd. The project required an estimated investment of $230 million. The general contractor was Liard Stroy Ltd and the designers were Mosproekt-2 of Russia and Tkhomesto Engineering of Finland.

PLOTS 6, 7 AND 8: UNDERGROUND MALL AND METRO STATIONS

A large underground complex containing the central core of the MIBC, an underground mall and two metro stations is located on these plots. Construction started in late 2001 on the 5.1ha site and was completed in mid-2004. The complex has a total floor area of 150,000m² and includes:

  • 35,000m² shopping mall
  • 20,000m² multi-purpose performance complex
  • 10,000m² dancing complex
  • 15,500m² sports and leisure complex
  • 30,000m² ‘Wonderful World of Entertainment’ theme park
  • 7,000m² restaurant complex
  • 30,000m² hotel

The complex developer was CITY JSC and the designers were Mosproekt-2. The construction engineers were Bovis Europe and Jones Lang Lassale of the UK.

PLOT 9: CAPITAL CITY PROJECT

This project involves the construction of two connected tower blocks and a dome. The towers will be of 73 and 62 storeys high, with a 16-storey domed building containing an atrium. Connecting the buildings will be a podium building with three storeys above ground and 4–6 below ground.

The lower levels of each tower will be for office space (200,000m²), while the upper levels (above 80m) will be residential and the dome will be used as a retail area. The investment for the project is $250 million.

The developer is Capital Group; the construction engineers are Bouygues Construction and the architects are Erick van Egeraat Associated Architects of Holland. Construction has been underway since 2005 and the project is scheduled for completion in mid-2007.

PLOT 10: NABEREZHNAYA TOWER

This project involves the construction of a new office and apartment complex consisting of three A-Class buildings 16 (86m), 27 (135m) and 52 (250m) storeys high, with a total floor area of 220,000m². The construction began in mid-2003 on the 2.55ha site with the smallest of the three buildings.

The first building was completed in autumn 2004. Enka, a Turkish construction company , is carrying out the development and construction. Enka has invested a total of $150 million so far. Work is continuing on the other two buildings with completion expected in 2007.

PLOTS 11 AND 12: MIXED-USE TOWER BLOCK

The major project on these plots will be a 300m, 75-storey, mixed-use tower block with over 204,000m² of floor space. The facilities will include commercial and government offices, residential areas, retail space, leisure and health centres and a four-star hotel.

Offices will occupy the floors 4–45, while apartments are on floors 48–66. The building was designed as a two-tier skyscraper, 30 floors in the first tier and 37 in the second one. The second floor of the building will be occupied by a casino. The 47th floor will be occupied by a gymnasium.

The designers for the project are Swanke Hayden Connell Architects and the investors are Techinvest, who are investing $270 million. The contractors for the construction are Summa, a Turkish development company. Groundwork was carried out by Kaskatas. Construction on the building started in the third quarter of 2004 with completion scheduled for late 2006.

PLOT 13: FEDERATION OFFICE COMPLEX

The Federatsiya (Federation) office complex is to consist of two towers, one 57 storeys high and the other 87 storeys (345m), and a podium. The 87-storey tower will hold offices and the 57-storey tower will include residential apartments and a hotel. The total floor area of the complex will be 240,000m².

The podium will have three to five levels and 30,000m² of floor space and will contain retail areas, banking facilities, cafes, restaurants and leisure facilities. The complex will have 14 lifts built between the two towers, including four ‘Shuttle’ round-observation lifts.

Stroimontage and NIKoil Financial Group will invest more than $500 million in the project. The architects for the project are P Schweger, S Tchoban and A Asadov of Germany. Stroimontage is the general contractor for the project. Construction started in April 2004 and the complex is scheduled for completion by 2008.

PLOT 15: CITY HALL AND DUMAS

Plots 2 and 3 are owned by the Moscow City Government and original plans were for the new City Hall and Dumas (Parliament) buildings to be located there. However, these buildings will now occupy Plot 15.

The construction on Plot 15 consists of four 70-storey interconnected 308.4m buildings. The project started in November 2005 and will be finished by the end of 2007.

It is expected that all government administration will be accumulated in the new complex to provide better organisation, allowing the buildings currently in use to be sold.

The four skyscrapers will be connected by several two storey bridges between towers and eight storey bridges at the top. The highest bridges will be built in shape of letter ‘M’ for ‘Moscow’.

PLOT 16: RUSSIA TOWER

Plans for a 600m-tall tower to be built in Moscow to designs by British architect Sir Norman Foster were released in March 2006. ST Towers is the developer behind the project and is part of the ST Group.

The Russia Tower will be more than 50% higher than the Empire State Building and is to be built within the Moskva-City development on Plot 16 near the site’s border with the Third Ring Road. It will overshadow the 430m Federation Tower under construction at Moskva-City, which developers say will be the tallest building in Europe when it is completed in 2008.

The 420,000m² tower is a striking design comprising three blade-like structures arranged in a trefoil-like plan around a central core and tapering sharply toward the top, with part of the steel structure exposed on the outside like an exoskeleton.

Described by the architect as a vertical city, the tower is to house parking and retail space on nine underground levels, a public ice rink on the first floor under a spacious, pyramidal atrium, a hotel with serviced apartments above, 24 floors of office, high-end apartments on the top levels and a public observation deck at the very top. The resident population of the tower could be 25,000.

The Russia Tower is billed as an environmentally friendly project, maximizing natural ventilation and lighting, with solar cells, the collection of rainwater and snow to reduce water demand and the recycling of energy between areas with varying levels of demand. In addition, atria several floors high are to be spaced throughout the building’s central core and decorated with plants, providing the luxury apartments on the upper floors with private gardens in the sky.

The construction of the tower is expected to cost about $1.5 billion; of this about $150 million to $200 million would be supplied by ST Towers. Plans for the tower have been approved and it should be finished by about 2010. Construction has not yet started.

PLOT 17 AND 18: MULTI-PURPOSE OFFICE-HOTEL COMPLEX

The multipurpose complex will include two towers (80 and 78 floors), with a common underground space for parking. The high tower will contain office premises and the second tower will be a hotel.

The complex will also contain a roof-top restaurant with a panoramic view, cafes and bars, conference halls and billiard club. The architect is Skidmore, Owinds, and Merrill LLP. No dates have yet been announced.

PLOT 19: NORTHERN TOWERS

An office complex is being developed on this plot by ZAO Severnaya Bashnya. The Northern Towers will consist of three buildings – two 12-storey and one 29-storey. These will contain 135,000m² of floor space.

The architect is Project Institute 2 and the construction engineer is Bau Holding Strabag AG (Austria). Interior design in the building will be carried out by ABD Limited, and legal services with regard to lease documents are provided by PricewaterhouseCoopers.

The first phase of Northern Tower is scheduled for shell and core delivery by the fourth quarter of 2006. The marketing and leasing campaign has already started. Raiffeisenbank has agreed to become the first tenant of the complex.

Northern Tower will feature spectacular atriums, prime office premises and a multi-level parking for 688 cars. There will also be a multi-functional conference hall for up to 200 people, banking premises, restaurants and cafes, a fitness centre with a swimming pool operated by Reebok, a professional dental clinic and a beauty parlour.

POWER PLANT CONSTRUCTION

The power supply for the new MIBC has been a subject of much contention among foreign investors. The complex requires an efficient power distribution system operating at 20kV rather than the more typical 10kV.

CITY JSC and power supplier Mosenergo JSC put forward a proposal in 1999 to the Moscow City Government to develop a new power network for the MIBC, mini-metro, metro junction core, Eurostation and Sheremetyevo-Moscow Rapid Transit System.

The power and heat supply for the MIBC will be provided from three sources: the Mosenergo power station ‘SS-CITY-1’; the district heat and power station ‘Krasnya Prsnya’; and the MIBC power plant on Plot 7A, which entered its first phase of construction in 2002–2003 and is now well into its second phase with completion expected in 2006.

Having established the power supply sources, the next part of the project was the bulk power and distribution network to support the MIBC. Phase 1 of the MIBC power plant has seen the construction of a Gas Turbine Unit (GTU) and Heat and Power Plant (HPP) with a capacity of 50MW and a substation with two transformers for 110V from 20kV and 110V from 10kV and two 63MVA distribution units. The next phase will see an increase of capacity up to 100MW.

The developers of the power plant are CITY JSC and CITY-ENERGO Company Ltd. The contractors for the project are Liard-Stroy Ltd and the designers of the plant were Mosproekt-2 and VNIPI Energoprom.

TRANSPORTATION CONSTRUCTION

The Moscow–Sheremetyevo line is the first phase of the RTS to connect the three satellite airports to the centre of Moscow. This first line, 34.3km in length, will provide interconnectivity between the airport, regional centres and urban junctions and also interconnect with the existing municipal transport system. The project was started in 2001 and eight stations were planned. This stage is now complete.

The developer for the RTS is CITY JSC in collaboration with the City of Moscow; the designer is SNC Lavalin of Canada. The Phase 2 section of the project to extend the line to cover Vnukovo Airport was started in 2004 and is now nearing completion (scheduled to open in 2007).

The RTS development not only concerns rail links to the new commerical centre of Moscow but it is also a development in its own right. The Plot 11 development will include the construction of the new Moscow transport terminal uniting the RTS, three lines of the underground and the intercity bus terminal.

The complex will include transport stations with waiting rooms, boarding areas for VIPs, a hall of customs inspection, left-luggage offices, a 342 room hotel and ticket offices.

For this section of the development Citer Invest B.V. of the Netherlands is the developer, Behnish and Behnish Architekten of Germany are the architects. The investment is $200 million and construction is underway with an expected completion in 2007.

MINI-METRO LINE

A mini-metro line was also constructed to provide transportation within the MIBC and to connect with the historical centre of Moscow. There are three stations, one constructed in Phase 1 of the project and two in Phase 2. The three stations are Dorogomilovskaya, International and Moscow – City.

The length of the line is 5.85km. The engineering and transport contractors were Metrogiprotrans JSC. The line along with the International and Moscow – City stations came into operation in September 2005.

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AT&T announces plan for $5 credit after nationwide outage in cellular network

The dallas-based company says it will apply the credit to customer accounts in the wake of thursday’s major service disruption..

AT&T's headquarters building in downtown Dallas.

By Zaeem Shaikh

5:00 AM on Feb 25, 2024 CST

AT&T plans to credit the accounts of customers impacted by this week’s nationwide outage in its cellular service, the company officials said Saturday.

The Dallas-based telecommunications giant apologized in a statement for Thursday’s disruption, which impacted tens of thousands of customers as well as those with other cellular carriers who attempted to reach AT&T users.

“We recognize the frustration this outage caused and know we let many of our customers down,” company officials wrote in a statement on AT&T’s website . “We understand this may have impacted their ability to connect with family, friends and others. Small business owners may have been impacted, potentially disrupting an essential way they connect with customers.”

Officials said in the statement that they want “to help make it right” by automatically applying a credit to impacted customers’ accounts. According to the company, each customer will receive one $5 credit on their AT&T Wireless account — the equivalent of what officials say is the average cost of a full day of cellular service.

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The credit doesn’t apply to AT&T Business, AT&T Prepaid or Cricket, company officials said, and it will typically be applied within two bill cycles.

Reports of the outage began about 2 a.m. Thursday. By 8:15 a.m. over 73,000 customers reported cellular outages to Downdetector.com , which tracks disruptions to services.

The outage also disrupted FirstNet, AT&T’s emergency response network .

Related: What to know about AT&T’s cellular network outage

By 2 p.m., AT&T had fully restored wireless service to all customers, officials said. Speculation fueled initially on why wireless subscribers lost service, with some pinning the disruptions on powerful solar flares . Federal agencies were investigating the disruption.

The company later blamed the incident on an error in coding .

“Based on our initial review, we believe that today’s outage was caused by the application and execution of an incorrect process used as we were expanding our network, not a cyber attack,” an AT&T spokesperson said.

In the Saturday statement, company officials said they’re taking steps to prevent this from happening again, but did not elaborate.

“Our priority is to continuously improve and be sure our customers stay connected,” AT&T officials wrote.

Zaeem Shaikh

Zaeem Shaikh , Staff, Reporter . Zaeem Shaikh is a reporter covering breaking news for The Dallas Morning News. He grew up in Fresno, California, and graduated from Fresno State University in 2022. Before joining The News, he has reported for The Sacramento Bee, CalMatters and the Oregonian.

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Moscow-City – The Moscow International Business Center

  • 3 years ago

The Moscow Intenational Business Center

Moscow-City is an iconic location for life and work in Russia’s capital. Enormous skyscrapers, business centers, the best restaurants and retail spaces – all this is concentrated in one place. The ultramodern Moscow-City towers are truly striking in their outward appearance, and the layout of the apartments inside and the fantastic views that can be seen from the higher floors are nothing short of impressive.

This skyscraper compound, often referred to as Moskva-City, is the Russian take on Manhattan, where businessmen strike multi-million dollar deals daily while ordinary life goes on next door. Its state of the art spaces offer the ultimate convenience. The infrastructure of this business district is so well-developed that anyone can find something interesting for themselves here: from residential apartments to boutiques, clubs, exhibitions and more.

When the foundations for the Moscow-City skyscrapers were laid, a special kind of concrete was used, the properties of which are amplified by many times compared to standard concrete. Even in the event of a plane crashing into one of the buildings, the structural integrity of the towers will be preserved.

The architects of the Moscow-City Business Center have created a unique locality that has integrated into itself the hub of the capital’s business life and a whole ensemble of historical monuments. Anyone can admire the beauty of these skyscrapers from within or without the compound. There are also a number of apartments for sale or rent available in the MIBC itself. But first, let’s have a look at some more interesting facts about the financial core of Russia’s capital.

  • 1 How It All Began
  • 2.1 Moscow-City Central Core
  • 2.2 Tower 2000
  • 2.3 Evolution Tower
  • 2.4 Imperia Tower
  • 2.5 Moscow Tower and St. Petersburg Tower
  • 2.6 Steel Peak Tower
  • 2.7 Federation Tower
  • 2.8 Mercury City Tower
  • 2.9 OKO Tower Complex
  • 3.1 Afimall City Shopping Center
  • 3.2 Bagration Bridge
  • 3.3 Expocentre Fairgrounds
  • 4 Renting and Buying Real Estate in Moscow-City

How It All Began

The history of Moscow-City goes all the way back to 1992. The government of Moscow at the time wanted to bring into existence its own skyscrapers like the ones in London or New York. And the idea caught on. In 1992 the project for the construction of the huge “Moscow-City” MIBC compound was enthusiastically approved, kick-starting the painstaking preparatory works. The original intention was that the skyscrapers would only house office space. However, as time went on, the towers began to welcome in ordinary residents who wanted to live on the territory of this business and finance hub.

Moscow-City is undoubtedly a city within a city. Its grandeur is mind-boggling. It is perfect in every way: from location to infrastructure. And today, anyone can get a feel of the atmosphere of the “capital city” of Russia’s business world – many of the apartments in Moscow-City are available for rent. Any citizen of Russia and even nationals of other countries can make use of these offers.

What It’s Like in 2021

Today Moscow-City is not just a magnificent and fascinating sight, but also a real hub for the work, life and leisure of thousands. Its infrastructure is organized in such a way that there is no need to leave the territory of the “city within a city” at all. This business district contains everything one may need for work and recreation. And if one does decide to venture out into the larger metropolis, the MIBC’s three subway stations make this remarkably simple to do.

Moscow-City stands on the Presnenskaya Embankment . Each of the buildings in the district has a name, which simplifies its identification. Some of the buildings form complexes that are united under one name, such as the Neva Towers and the Naberezhnaya Tower complex of two skyscrapers and one high rise. There are a total of 16 towers in the MIBC, of which the most popular are:

  • Moscow-City Central Core;
  • Tower 2000;
  • Evolution Tower;
  • Imperia Tower;
  • City of Capitals (Moscow Tower and St. Petersburg Tower);
  • Steel Peak Tower;
  • Federation Tower;
  • Mercury City Tower;
  • OKO Tower Complex.

Moscow-City Central Core

This is the most complex building within the MIBC compound. Its total floor area is a whopping 1 476 378 sqft (450 000 m²). It consists of two massive parts, each of which boasts a truly impressive infrastructure. The underground part includes 3 Moscow Metro stations, a parking lot for automobiles and a shopping mall. The aboveground part houses a concert hall and a hotel.

Tower 2000 is a skyscraper having 34 stories. Its total floor area is 200 318 sqft (61 057 m²), most of which is office space. The key feature of this skyscraper is its direct connection to the Bagration Bridge, which has its own shopping arcade. The tower has everything one may need while working here, including a large parking lot and several restaurants.

Evolution Tower

This elegant structure is 836 feet (255 m) high – that’s a whole 54 stories! The total floor area here is 554 462 sqft (169 000 m²). The Evolution Tower’s key feature is that it has its own Wedding Hall. This skyscraper houses large office spaces, a parking lot and several restaurants.

Imperia Tower

MIBC’s Imperia Tower is the undeniable focal point of the MIBC’s business life. Its height is 784 feet (239 m), which means one can hold conferences and resolve key business matters on the 59 th floor! And that really is amazing! The tower has everything: offices, hotels, restaurants and parking lots. But if you want a truly unforgettable experience, visit the viewing platform! It is situated on the 58 th floor and a simply astounding view of Moscow can be seen from it.

Moscow Tower and St. Petersburg Tower

The Moscow and St. Petersburg Towers are the chief representatives of the MIBC. The Moscow Tower has 76 stories and is 990 feet (302 m) high, while the St. Petersburg Tower has 65 stories and stands 843 feet (257 m) tall. Both towers offer fantastic views of the capital city.

Most of the floors of these two skyscrapers are taken up by luxurious sky apartments. There are also several recreational and entertainment centers, office spaces, restaurants, etc.

Steel Peak Tower

Also known as the Eurasia Tower of Moscow-City, this supertall skyscraper has a total of 680 912 sqft (207 542 m²) of floor space. Most of this is taken up by offices, and the rest – by residential quarters (around 65 616 sqft or 20 000 m²). The tower also houses a number of the greatest restaurants, studios and shopping centers.

Federation Tower

The Federation Tower is a complex of two skyscrapers, known as Tower East and Tower West. Tower East is the second highest building in Europe (the first is a skyscraper recently erected in the city of St. Petersburg). Its height is a colossal 1 223 feet (373 m) and that makes 95 stories! Tower West, on the other hand, is noticeably shorter at 794 feet (242 m).

The Federation Tower is a multifunctional complex.

Mercury City Tower

The Mercury City Tower skyscraper is widely known as one of the tallest buildings in Europe. Its height is 1 112 feet (339 m) and it has 75 stories. It is multifunctional by concept, holding within its walls shopping centers, offices and all kinds of other spaces. It is also possible to rent apartments here.

OKO Tower Complex

The OKO Tower Complex consists of two towers – the North Tower (49 stories and 803 ft or 245 m in height) and the South Tower (85 stories and 1 155 ft or 352 m in height).

Each of the MIBC’s tower complexes has its own recreational and entertainment areas, restaurants and parking lots. The top floors of most of these buildings contain luxurious fully-furnished apartments. At night, the towers shine with bright lights, while inside them the panoramic windows reveal astounding views of Moscow. This breathtaking view of the capital of Russia is why visiting Moscow-City is a must!

What Not to Miss

There are many interesting landmarks within the Moscow-City compound, but three of them are truly deserving of special attention:

  • The Afimall City Shopping Center;
  • The Bagration Bridge with two galleries and a shopping arcade;
  • The Expocentre Fairgrounds.

Afimall City Shopping Center

The Afimall City Shopping and Entertainment Center is located in Moscow-City’s Central Core. It is divided into 4 zones, each with its own theme – one for every season of the year. The shopping center houses the biggest indoor fountain found worldwide. The height of this watery wonder is 118 feet or 36 meters.

The shopping and entertainment center contains everything one might expect from one of the largest centers of its kind:

  • Retail brand stores;
  • Exhibitions;
  • Game rooms;
  • and Restaurants.

The main recreational space is roofed with a giant transparent dome, which is an impressive sight to behold.

Bagration Bridge

Bagration Bridge with its upper and lower galleries has a shopping center all of its own and was the first structure to be built as part of the Moscow-City business district. Its lower gallery is a shopping arcade and its upper gallery is an open-air viewing platform with a spectacular view of the MIBC and the Moskva River. The hall of the bridge houses the 23 foot tall sculpture called “Tree of Life”. Having gone through the bridge via either one of its two galleries, a pedestrian would find themselves standing right on the Kutuzovsky Prospekt.

Expocentre Fairgrounds

The Expocentre Fairgrounds exhibition venue is located at the very heart of the capital. The first exhibition held at the Expocentre happened all the way back in 1959, much earlier than the MIBC was erected. Today it is the venue of many interesting events.

Exhibitions with very diverse themes are regularly held at this complex. An up-to-date schedule can be found on the official webpage of the Expocentre. The events can be free or fixed-price entry, depending on their type.

Renting and Buying Real Estate in Moscow-City

Moscow-City is not only a work and business hub, but also a residential neighborhood. Any citizen of Russia can rent or buy apartments or elite sky lounges here. The variety of residential real estate available inside the skyscrapers is impressive, including options for any pocket. The following buildings in the MIBC contain residential blocks:

This skyscraper has a mirror glass façade which reflects the passing clouds. Just imagine how beautiful that looks! Anyone can buy an apartment in the Federation Tower. Such properties are not only a good investment, but also a mark of prestige. The average price of residential real estate here is 45 million rubles for an apartment with a total floor area of 334 sqft (102 m²). The average price of a square meter (3.28 square feet) is in the range of 650 to 700 thousand rubles. There are two- and three-room apartments available in the Federation Tower, each with its own loggia. As for rent, the minimum price of one month’s stay in a three-room apartment in this skyscraper is 300 000 rubles per month.

The Mercury City Tower skyscraper welcomes citizens from all parts of Russia. This building is no less tall than the world-famous Dubai skyscrapers. Living in its apartments is a delight. The minimum cost of an apartment in the Mercury City Tower is 75 million rubles. The average price of a square meter (3.28 square feet) is 800 thousand rubles. And for those looking for a lower price point, some of the properties are also available for rent – in this case you will pay a minimum of 250 thousand rubles per month.

The Imperia Tower is a key cluster of interesting offers. The best options for buying and renting apartments within the MIBC can all be found in this skyscraper. The lowest price of a residential apartment here is 40 million rubles. A square meter (3.28 square feet) in a luxurious apartment in the Imperia Tower currently costs 600 thousand rubles, while the price range of the listings available for rent in this skyscraper is from 350 thousand all the way up to 1 million rubles per month.

This complex, standing on a faceted or “crystal” base, is an architectural engineering project boasting spectacular design. Behind its impressive façades is an abundance of penthouses and apartments having floor areas in the range of 262 sqft (80 m²) to 984 sqft (300 m²). The minimum price of an apartment in the OKO Tower Complex is 40 million rubles (the price of a square meter (3.28 square feet) is 500 thousand rubles). You can rent an apartment here starting from 400 thousand rubles per month.

City of Capitals

The City of Capitals is an exemplary architectural complex. Its sum appearance gives the impression of a huge city. Inside its walls are spacious apartments available for purchase and rent. This complex is considered to be especially prestigious. The prices of apartments here start from 50 million rubles, while the minimum cost of renting is 400 thousand rubles per month.

Please note! The price of real estate available for purchase or rent depends on: the tower, the floor, the total floor area, the furnishings and/or interior design, and other factors.

The key advantages of buying/purchasing real estate in Moscow-City are:

  • Favorable location;
  • Convenient transportation links;
  • Well-developed infrastructure;
  • High safety level;
  • Efficient architecture;
  • Panoramic windows.

Buying real estate in Moscow-City is very much a rational decision, most appealing to those who value the ultimate level of comfort. The residential apartments here boast impressive interior design solutions executed in the contemporary style.

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    2020-2025 Strategic Plan 3 The Mission of the Agency is to promote sustainable economic growth, vitality, and community enhancement through collaboration and community investment. Mission GROWTH Grow the local economy to increase community vitality, resilience, and strength ENHANCEMENT Enhance and contribute to community assets that make Moscow a great place to live, work, and play

  21. Reddit has never turned a profit in nearly 20 years, but it just filed

    The company also said in its filing it hosted more than 100,000 active communities on the site in December 2023. The company's sales in 2023 reached $804 million, up 21% from $666.7 million in 2022.

  22. Moscow International Business Center

    The Moscow International Business Center (MIBC), also known as Moscow-City, is an under-construction commercial development in Moscow, the capital of Russia.The project occupies an area of 60 hectares, and is located just east of the Third Ring Road at the western edge of the Presnensky District in the Central Administrative Okrug.Construction of the MIBC takes place on the Presnenskaya ...

  23. Moscow International Business Centre (MIBC)

    The Moscow International Business Centre (MIBC) is an ambitious engineering project in the centre of Moscow. The site is on an old urban area near the river embankment. The goal of the project is to create a new business district within the city. The whole complex is to be built on a 100ha site (divided into 30 plots) designated for new ...

  24. South Korea Unveils Corporate Value-Boosting Plan to Replicate Japan

    South Korea unveiled further details on its plans to push listed companies to improve management and corporate governance, taking a cue from Japan to address a view that local stocks are ...

  25. AT&T announces plan to offer $5 credit after major outage disrupted

    business Technology. AT&T announces plan to offer $5 credit after major outage disrupted mobile network The Dallas-based company will offer a credit to customers impacted by Thursday's outage.

  26. Moscow-City

    The Afimall City Shopping and Entertainment Center is located in Moscow-City's Central Core. It is divided into 4 zones, each with its own theme - one for every season of the year. The shopping center houses the biggest indoor fountain found worldwide. The height of this watery wonder is 118 feet or 36 meters.

  27. SoftBank Stock Rises on CEO's Plan for $100 Billion Chip Project

    SoftBank Group Corp.'s stock rose as founder Masayoshi Son considers the creation of a $100 billion chip venture that would supply AI-enabling semiconductors. Shares in the Tokyo-based tech ...

  28. Capital One to Buy Discover Financial in All-Stock Deal (COF, DFS

    Capital One Financial Corp. agreed to buy Discover Financial Services in a $35 billion all-stock deal to create the largest US credit-card company by loan volume, giving the combined entity a ...