Micro Finance Final Draft

8/4/2019 Micro Finance Final Draft

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Quick Financial Solutions

BUSINESS PLAN

FOR

QUICK MICROFINANCE

Prepared for:

Mr. Quick

General Manager


P.O. Box

Dar Es Salaam

Tanzania


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Quick Financial Solutions, August 11

TABLE OF CONTENTS

TABLE OF CONTENTS .....................................................................................................2

1.0 EXECUTIVE SUMMARY ........................................................................................... 32.0 COMPANY DESCRIPTION ........................................................................................ 4

2.1 Legal Status ................................................................................................................4

2.2 Mission .......................................................................................................................42.3 Vision .........................................................................................................................4

2.4 Objectives .................................................................................................................. 4

2.5 Ownership .................................................................................................................. 43.0 MARKET ANALYSIS ..................................................................................................6

3.1 Overview ....................................................................................................................6

3.2 Demand ...................................................................................................................... 73.3 Customers .................................................................................................................. 7

3.4 Market Segmentation ................................................................................................ 7

4.0 SERVICE DESCRIPTION ............................................................................................ 9

4.1 Implementation .......................................................................................................... 94.2 Collateral .................................................................................................................10

4.3 Assets Valuation ......................................................................................................10

4.4 Methodological Example .........................................................................................104.5 Sustainability ............................................................................................................11

5.0 MANAGEMENT PLAN ............................................................................................. 12

5.1 Personnel Plan ..........................................................................................................12

6.0 FINANCIAL PLAN .....................................................................................................136.1 Basic Assumptions ...................................................................................................13

6.2 Sources of Funding .................................................................................................. 13

6.3 Start-Up Capital Requirement ..................................................................................136.4 Financial Projects .....................................................................................................14

6.4.1 Forecasted Income Statement ...................................................................................14

6.4.2 Net Profit/Loss Chart ................................................................................................156.4.5 Ending Cash Movement Chart ..................................................................................17

6.4.6 Assets Growth Chart ................................................................................................19

............................................................................................................................................ 196.4.7 Non Current and Current Assets Chart ..................................................................... 19

............................................................................................................................................ 197.0 ORGANIZATION CHART ........................................................................................20........................................................................................................................................ 20

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1.0 EXECUTIVE SUMMARY

QUICK MICROFINANCE is a business of Quick Financial Solutions. QUICK

MICROFINANCE is a registered limited liability company established and incorporated

2011 under Tanzania Companies Ordinance Act No. 12 of 2002.

QUICK MICROFINANCE has decided to establish this service oriented business to

assist needy society in both urban and rural areas to meet their financial needs beforetheir revenue realization.

People will be able to borrow a limited amount of money from our QUICKMICROFINANCE in order to meet their urgent financial requirements at that particular

time and need before receiving their revenues. After receiving their revenues borrowers

will be responsible to repay the loans immediately with reasonable interest within a

month by pledging their justifiable selected justifiable movable and immovable assets.

Some unpredictable circumstances which one can not expect and budget for them may

happen and require money anytime within a month before ones receiving his/herrevenue. When this happens one needs something to supplement his/her budget

immediately at that particular need and time. He/she specifically needs money to meet the

incident.

QUICK MICROFINANCE is being established to solve these situations and will take

care of the cases. QUICK MICROFINANCE will lend money to meet peoples urgentneeds and people will be required to repay the borrowed money right away after they

receive their income.

Capital requirement for this business to start-up is TZS 220,535,000/= whereby theamount will be contributed by equity and contribution from silent investors.

We look forward to working with needy people and hope that they will enjoy this serviceand support our efforts on solving their instantaneous financial requirements

General Manager


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2.0 COMPANY DESCRIPTION

2.1 Legal Status

QUICK MICROFINANCE is a registered limited liability company established and

incorporated in 2011 under Tanzanian Companies Ordinance Act No. 12 of 20002 videcertificate of registration number xxxxx (See a copy of certificate of registration).

2.2 Mission

To become a one stop reliable and trusted quick financial solution center in Tanzaniawhereby people will get their financial problems solved immediately.

2.3 Vision

To provide immediate short term financial solutions in terms of loans to our esteemed

customers in exchange of valuable immovable and movable assets as loan collaterals.

2.4 Objectives

The main objectives of this business are as summarized below:

1. To assist most needy persons in both rural and urban areas meet their budgetsbefore returns and revenues;

2. To assist people solve their unforeseen circumstances like healthy problems andalike which may happen without their control;

3. To raise living standards of people with low income in both rural and urban areas;

4. To assist people with low income to meet their needs above their immediatefinancial capacity;

5. To assist business men and women meet their immediate financial needs in the

course of their businesses;6. To promote growth of businesses and entrepreneurship development;

7. To assist people with any immediate financial needs like school fees.

2.5 Ownership

This business is owned by Quick Financial Solutions a limited liability company. Thetable below shows companys shareholders structure.

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S/N Shareholders Name Nationality % Shares

1

2

34

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3.0 MARKET ANALYSIS

3.1 Overview

The legal average minimum wage of Tanzanians is less than TShs. 150,000.00 per

month. This amount is very small for anybody to meet his/her basic needs which arefood, shelter and clothing forgetting the necessities like education, transport, utilities,

investment, etc.

With the same money, people are supposed to meet their unforeseen and unavoidablecircumstances like illness, and others of the like.

Always resources are scarce to meet all the needs. But there should be a solution which,in this context is opportunity costunder prioritization of ones needs. With this national

minimum wage amount and by considering our nations possibility of paying sustainablemore minimum wages in the near future, it becomes impossible to apply the theory ofopportunity cost and prioritization of ones needs.

The lives of people who depend on minimum wages or less income compared to their

needs become worse day after another leading to lower our national social and economicdevelopment.

There is a vital need to assist the needy ones by using the scarce available resources. Theaim is to harmonize and standardize the living standards of many people possible. It

should be noted that our government is fighting hard to distribute its wealth and resources

so that every resident can benefit. But, the governments capacity is very limited to do allthese at once; this may take some decades or centuries to assist every individual to meet

his/her financial requirements at once.

However, the government through economy and market liberalization it encourages the

private sector and foreign investors to invest in financial service sector to assist the

society in getting financial needs solved.

QUICK MICROFINANCE is being designed and established to assist people and

businesses with immediate financial needs meet their requirements.

QUICK MICROFINANCE will provide loans to all people and businesses with provedimmovable and movable assets and capability to repay loans within a month of receiving

revenue.

The loans are aimed at making needy persons and businesses meet their necessary

responsibilities and needs like paying school fees, hospital bills, electricity, working

capital, credits, and other utilities on time to avoid any interruptions which may occur totheir normal course of living styles and operations.

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Terms and conditions of loans have been prepared to build a sustainable mutual shield for

both QUICK MICROFINANCE and the borrowers.

3.2 Demand

Every individual or business is willing and responsible to pay for his/her accounts. But,

sometimes people and businesses are unable to pay for their accounts due to very limitedfinancial resources at that particular time of a need. However, if given time and

appropriate approach, most people and businesses can afford to pay for their accounts.

Sometimes even if given longer time to pay for their accounts they may not be able tofully pay for the accounts due to very limited resources available and too many priorities

present which remove the application of opportunity cost theory.

For example, government secondary school opportunities are scarce and most parents

want to see their children going to secondary schools, but their capacities to pay for theprivate secondary school fees at once especially during the beginning of the terms are

very low and practically impossible. It could be possible and easier for parents to pay the particular school fees in small installments relative with their incomes, but school

policies dont allow for such tolerances for the same reasons; hence life becomes very

difficult and complicated.

Since not to send children to school is not the best alternative, and since by using the

available scarce human and financial resources, other best solutions can be found anddesigned to ease the situation, there is a need now to design a sustainable solution to this

problem.

Most of immediate human beings and businesses needs are periodical, but need to besolved at once. The solution is needed to be designed and developed to solve at once

needs at a specific timely period of time by using allowable and possible available

resources. It could not be a permanent solution but, a fair solution to allow other thingsgo while trying to find a permanent solution.

3.3 Customers

The targeted populations of this business are all those people and businesses who have

proved reliable income but need supplemental financial assistance to support their scarcenormal incomes. These people and businesses may include private sector employees,

civil servants, approved farmers, registered businesses and businessmen and women.

3.4 Market Segmentation

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The market and potential customers for this business is divided into three main segments

i.e. registered businesses (70%), individual business men and women with proved source

of incomes (25%), and private sector employees and civil servants with reliable provedsalaries (5%).

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4.0 SERVICE DESCRIPTION

4.1 Implementation

4.1.1 License

Business license will be acquired from relevant authority to legally run the business.

4.1.2 Choice of Location

Best location of the business will be chosen regarding the availability of market and

potential customers. However, currently we plan to locate the facility in Dar Es Salaam

Tanzania where there are reliable prospective customers and that Dar Es Salaam is thecommercial city of Tanzania.

4.1.3 Office

Spacious and secured office will be required for safe, efficient, effective and successful

operations of the business. The office will be either rented or constructed depending on

the availability, affordability, cost effective and security.

4.1.4 Staff Recruitment

Adequate and qualified staff will be recruited prior to operations.

4.1.5 Capital

Adequate funds will be accumulated prior to efficient, effective, successful and smooth

running of the business.

4.1.6 Activities

Businesss accompanying activities during operations will include:

Customer Services;

Asset (Collateral) Assessment and Valuation;

Loan Assessment; Loan Approving;

Loan Advancing;

Credit or Loan Collections;

Banking activities;

Etc.

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4.2 Collateral

Proved valuable and scrutinized immovable and movable assets will be considered assecurities or collateral items for someone or a business to be granted a loan. Collateral

will be fully explained in the terms and conditions of loans. However, the items will

include immovable and movable assets like valuable Motor Cycles, Motor Vehicles,Land and Buildings, Machinery and Equipment, Furniture and Fittings, HomeAppliances, Computers/Laptops and Printers, Investments, etc.

4.3 Assets Valuation

Pledged assets will be valuated at forced sale value.

Forced Sale value = 80% of Market Value

Cash Advance Value = 50% of Forced Sale Value

4.4 Methodological Example

Mr. Myers is a father of three children, Alice, Bernard and Charles. While Mr. Myers is a

farmer, his wife Lisa is a secondary school teacher. The net income of this family is450,000/= a month. Charles is a successful form three student in one of the public

boarding secondary schools in Tanzania which does not charge any fee except for pocket

money. Bernard is one of the best form two students in a private day secondary schoolvery close to their residence who pays a total amount of 400,000/= for his school fees per

year. Alice, the last born has just been selected to join a private boarding secondary

school about 200 kilometers from their home town. In order for Alice to be accepted tothe school her parents has to pay at least half of the total school fees amounting to700,000/= per year. All the schools accept at least half of the total fees amount. The

family can only pay half fees of Alice and some pocket money for Charles now.

Unfortunately, all the schools open on January 15th, 2007 and Mr. and Mrs. Myers areunable to raise that amount of money at this specific time to pay for all the fees and costs

for their three children at once and especially Bernards half fee which is urgently

required now. On January 12th, 2007, Mr. and Mrs. Myers remember of QUICKMICROFINANCE as solution for their problem. They all decide to go to QUICK

MICROFINANCE to see if they can be helped.

After a short scrutiny by the QUICK MICROFINANCEs Loan Officer the following arethe decisions:

Although he fulfills other loan requirements, Mr. Myers can not be given a loan

because he does not have proof of movable assets on his name;

Mrs. Myers, Lisa is approved for a loan because she has proof of reliable and

valuable movable assets worthy TShs. 1,000,000/= on her name;

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Lisa will be given a loan relative to valuation criteria for granting Microfinance

loans/= i.e. 50% of forced sale value (80%) of TShs. 1,000,000/= (TShs.800,000/=) equal to TShs. 400,000/=;

Lisa is required to pay the entire loan within a month with an interest of 20%.

After receiving a loan the Myers family is able to send all the children to school on time.

On January 29th, Lisa receives her salary for the amount of 400,000/= from her employer.

She immediately goes to QUICK MICROFINANCE and pays the loan for the amount of480,000/= (Principal loan amount of 400,000/= plus 20% interest).

4.5 Sustainability

As the business is friendly designed to assist reliable, responsible and committed peopleand businesses meet their immediate and impossible needs at that particular time, it is

hoped that people and businesses will be fair regarding the loans and the accompanyingterms and conditions.

As seen from above, the targeted populations of this business are reliable and most

committed people, registered businesses, and business men and women. In the same

meaning it is targeted and expected that these people and businesses will be reliable,responsible and committed to their loans and accounts.

To make this business sustainable, continuous and successful, all parties should becooperative, reliable, responsible and accountable to their accounts and actions.

This is merely a service oriented business to assist people and businesses with difficultiesin meeting their financial obligations on time due to some reasons and unavoidablecircumstances.

It is a great hope that people will be proud of this business and that will not jeopardizethis cheap, easy, fair and reliable immediate Microfinance by simple negligence.

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5.0 MANAGEMENT PLAN

The business is managed by three main organs namely the Management, Board of

Directors and Supporting Staff.

The management is composed of the Managing Director assisted by the Business

Development Manager, the Accountant, Asset Valuer, Cashier or Accounts Assistant and

the Customer Service Representative.

The Supporting Staff includes all other remaining employees.

The Board of Advisors includes the owner(s) and other external appointed people

according to their merits to advice on the business operations and its integrity.

In case of any management gap the business may use consultancy services.

5.1 Personnel Plan

During this planning period the business will have the following personnel plan:

1. General Manager/Accountant

2. Loan Officer/Customer Service Representative

3. Assets Valuer4. Driver

5. Security Guards

Table: Summary of Personnel Plan for the first Year of Operation

Number MonthlySalary AnnualPayGeneral Manager/Accountant 1 1,000,000 12,000,000

Assets Valuer 1 700,000 8,400,000

Loan Officer/Customer Service Representative 1 500,000 6,000,000

Driver 1 250,000 3,000,000

Security Officer 2 180,000 4,320,000

6 2,630,000 33,720,000

Number of staff will increase sustainably with expansion of business

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6.0 FINANCIAL PLAN

6.1 Basic Assumptions

1. Limited amount of money will be loaned every month;

2. Loan interest is at least 22 percent of the loan amount repaid within a month;3. At least 95% of all borrowers will pay for their loans on time;

4. All loans will be guaranteed by proved immovable and movable collaterals

(assets).

6.2 Sources of Funding

The business will be funded merely through:

1. Owners equity2. Silent Investors

6.3 Start-Up Capital Requirement

Item Qty Unit Cost Total

Office Rent (1000,000 x 12 months) 12 1,000,000 12,000,000

Customers Chairs 5 100,000 500,000

Office Table 3 200,000 600,000Office Chair 10 100,000 1,000,000

Computers (Customer Care, Asset Valuer & Cashier) 3 600,000 1,800,000

Printer & Photocopier 1 600,000 600,000

Safe 1 1,200,000 1,200,000

File Cabinet 1 300,000 300,000

Customers Table Long Table 1 300,000 300,000

Working Capital 1 200,000,000 200,000,000

Contingencies 1 2,235,000 2,235,000

Total 220,535,000

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6.4.2 Net Profit/Loss Chart

6.4.3 Accumulated Net Profit/Loss Chart

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6.4.4 Forecasted Cash Flow

QT 1 QT 2 QT 3 QT 4

Cash Inflows from Operations

Repayment of Principal Loans 171,000,000 213,370,000 265,061,400 345,394,64

Loans Interest 39,600,000 49,412,000 61,382,640 75,986,82

Total Cash Inflows from Operations 210,600,000 262,782,000 326,444,040 421,381,46

Cash Outflows from Operations

Salaries 7,890,000 7,890,000 7,890,000 7,890,00

NSSF 789,000 789,000 789,00

Office Rent 3,000,000 3,000,000 3,000,000 3,000,00

Office Supplies 150,000 150,000 150,000 150,00

Electricity 600,000 600,000 600,000 600,00

Water 120,000 120,000 120,000 120,00

Telephone & Faxes 900,000 900,000 900,000 900,00

Postages 15,000 15,000 15,000 15,00

Bank Charges 22,500 22,500 22,500 22,50

Repair and Maintenance 239,063 239,063 239,063 239,06

Fuel 900,000 900,000 900,000 900,00

Fixed Assets 8,535,000

Miscellaneous 500,000 500,000 500,000 500,00

Cash Advance to Customers 180,000,000 224,600,000 279,012,000 345,394,64

Capital reimbursement - 12,500,000 12,500,000 12,500,00

Total Other Cash Outflows 203,660,563 252,225,563 306,637,563 373,020,20

Balance Brought Down 220,535,000 227,474,438 238,030,875 257,837,35Cash Movements 6,939,438 10,556,438 19,806,478 48,361,25

Balance Carried Down 227,474,438 238,030,875 257,837,353 306,198,61

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6.4.5 Ending Cash Movement Chart

6.4.6 Discounted Cash Flows For The Period Of One Year

INITIAL QTR1 QTR2 QTR3 QTR4

Assets (6,300,000)

- - - -

Working Capital 200,000,000 - - - -

(200,000,000)

- - - -

Net Profit 24,315,063 34,127,063 46,097,703 60,701,883

Add: Depreciation 159,375 159,375 159,375 159,375

Net Cash Flow (6,300,000)

24,474,

438

34,286,43

8

46,257,

078

60,861,

258

DCF (22%) 1.00 0.82 0.672 0.551 0.451

Present Value (6,300,000)

20,069,

039

23,040,48

6

25,487,

650

27,448,

427

NPV 89,745,602

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6.4.7 Forecasted Balance Sheet

ASSETS QT 1 QT 2 QT 3 QT 4

NON CURRENT ASSETS

Machinery and Equipment 2,340,000 2,280,000 2,040,000 1,98

Furniture and Fittings 3,800,625 3,701,250 3,601,875 3,50

Investment(Cash) 200,000,000 200,000,000 200,000,000 200,00

Total Non Current Assets 206,140,625 205,981,250 205,641,875 205,48

CURRENT ASSETS

Accounts Receivable 9,000,000 11,230,000 13,950,600 37,46

Prepayments 9,000,000 6,000,000 3,000,000 12,00

Cash and Bank 27,474,438 38,030,875 57,837,353 106,19

Inventory 20,000,000 15,000,000 10,000,000 5,00

Total Current Assets 65,474,438 70,260,875 84,787,953 160,65

TOTAL ASSETS 271,615,063 276,242,125 290,429,828 366,14

LIABILITIES AND EQUITY

LONG TERM LIABILITIES

Long Term Borrowings 200,000,000 187,500,000 175,000,000 162,50

Total Long Term Liabilities 200,000,000 187,500,000 175,000,000 162,50

CURRENT LIABILITIES

Accounts Payables 3,000,000 2,700,000 3,600,000 4,20

Total Current Liabilities 3,000,000 2,700,000 3,600,000 4,20Total Liabilities 203,000,000 190,200,000 178,600,000 166,70

EQUITY

Paid Up Capital 44,300,000 51,915,063 65,732,125 138,73

Net Profit After Taxes for the

Period 24,315,063 34,127,063 46,097,703 60,70

Total Equity 68,615,063 86,042,125 111,829,828 199,44

TOTAL LIABILITIES AND

EQUITY 271,615,063 276,242,125 290,429,828 366,14

Current Asset Ratio 21.82 26.02 23.55 38.25

Liquidity Ratio 21.82 26.02 23.55 38.25

Return On Assets 0.09 0.12 0.16 0.17

Net Profit Margin 0.11 0.12 0.14 0.14

Return On Equity 0.35 0.40 0.41 0.30

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6.4.6 Assets Growth Chart

6.4.7 Non Current and Current Assets Chart

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7.0 ORGANIZATION CHART

BOARD OF DIRECTORS

GENERAL MANAGER

ACCOUNTANT ASSETS VALUER

SUPPORTING STAFF

COMPANY

SECRETARY

LOAN OFFICER/

CUSTOMER SERVICE REP

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