PREPARED BY:

GM Business Development Consult Limited

P.O.BOX 62279 Dar Es Salaam

Tel: +255 715 737302, +255 784 737302

Email: info@gmconsultz.com

Website: www.gmconsultz.com

PREPARED BY: GM Business Development Consult LimitedP.O.BOX 62279 Dsm -737302Email: Website: www.gmconsultz.com

April, 2014

i

BUSINESS PLAN

PREPARED BY:

GM Business Development Consult Limited

P.O.BOX 62279 Dar Es Salaam

Tel: +255 715 737302, +255 784 737302

Email: info@gmconsultz.com

Website: www.gmconsultz.com

ii

Table of Content

TABLE OF CONTENT..............................................................................................................................................................III

LIST OF TABLE..........................................................................................................................................................................V

EXECUTIVE SUMMARY..........................................................................................................................................................VI

SECTION ONE.............................................................................................................................................................................1

INTRODUCTION........................................................................................................................................................................1

1.1 BACKGROUND AND THE PURPOSE OF THE INVESTMENT.........................................................................................................11.2 COMPANY’S OBJECTIVES................................................................................................................................................................11.3 COMPANY’S VISION AND MISSION...............................................................................................................................................21.4 SHARE HOLDERS............................................................................................................................................................................. 21.5 CURRENT PROJECTS....................................................................................................................................................................... 21.6 STRATEGIC GOAL FOR 2014-2019............................................................................................................................................21.6 PAST FINANCIAL PERFORMANCE.................................................................................................................................................31.7 LEGAL STATUS................................................................................................................................................................................. 41.8 PURPOSE OF THE DOCUMENT.......................................................................................................................................................4

SECTION TWO............................................................................................................................................................................6

2.1 MICROECONOMIC BACKGROUND..................................................................................................................................................62.2 MARKET............................................................................................................................................................................................62.3 CLIENTS............................................................................................................................................................................................ 7POPULATION.................................................................................................................................................................................................... 7FINANCIAL ACCESS.......................................................................................................................................................................................... 7FINANCIAL LITERACY......................................................................................................................................................................................7SOURCES OF INCOME...................................................................................................................................................................................... 7USE OF CREDIT AND LOAN FACILITIES.........................................................................................................................................................7USE OF SAVINGS FACILITIES.......................................................................................................................................................................... 8

SECTION THREE........................................................................................................................................................................9

3.2 Transport Network:.................................................................................................................................................................. 93.3 Quality Control of Products................................................................................................................................................... 9

3.4 SYSTEM OF RECORD KEEPING......................................................................................................................................................93.6 PRICING STRUCTURE...................................................................................................................................................................103.7 LOAN AMOUNTS AND REPAYMENT CONDITIONS...................................................................................................................103.8 CREDIT RISK................................................................................................................................................................................. 103.10 OPERATIONAL RISK.....................................................................................................................................................................10

SECTION FOUR........................................................................................................................................................................11

MARKETING ASPECTS..........................................................................................................................................................11

4.1 PRODUCT....................................................................................................................................................................................... 114.2 MARKET AND SIZE AND COMPETITION...................................................................................................................................11

4.3 Product Demand and Pricing of Products.................................................................................................................... 114.4 PROMOTION.................................................................................................................................................................................. 124.5 TARGETED CUSTOMERS.............................................................................................................................................................124.6 MARKETING STRATEGY...............................................................................................................................................................12

iii

SECTION FIVE..........................................................................................................................................................................13

FINANCIAL PROJECTIONS...................................................................................................................................................13

5.1 ASSUMPTIONS........................................................................................................................................................................................ 135.2 FINANCING PROPOSAL:...............................................................................................................................................................135.3 PROFIT AND LOSS STATEMENT:................................................................................................................................................135.4 CASH FLOW STATEMENT:.......................................................................................................................................................... 145.5 SENSITIVITY ANALYSIS AND VIABILITY OF THE PROJECT:....................................................................................................145.5 THE BALANCE SHEET:................................................................................................................................................................ 145.6 CONTRIBUTION TO THE PROMOTER.........................................................................................................................................145.7 EMPLOYMENT CREATION............................................................................................................................................................145.8 GOVERNMENT REVENUE.............................................................................................................................................................14

SECTION SIX.............................................................................................................................................................................16

HUMAN RESOURCE PLAN AND MANAGEMENT............................................................................................................16

6.1 MANAGEMENT AND ORGANIZATION.........................................................................................................................................166.2 BOARD AND MANAGEMENT.......................................................................................................................................................166.3 KEY PERSONNEL:.........................................................................................................................................................................176.4 CORE HUMAN RESOURCES ELEMENTS:.....................................................................................................................................176.4 TRAINING AND TECHNICAL ADVICE.........................................................................................................................................186.5 GENDER CONSIDERATIONS.........................................................................................................................................................186.6 HIV/AIDS ACTION PLAN...........................................................................................................................................................18

SECTION EIGHT......................................................................................................................................................................19

CONCLUSION AND RECOMMENDATIONS.......................................................................................................................19

8.1 SWOT ANALYSIS.........................................................................................................................................................................198.1.1 Strengths.................................................................................................................................................................................... 198.1.2 Weakness......................................................................................................................................................................................... 198.1.3 Opportunities............................................................................................................................................................................ 19

8.1.3 THREATS........................................................................................................................................................................................ 208.2 ECONOMIC AND SOCIAL BENEFITS:..........................................................................................................................................208.3 FINANCIAL BENEFITS:.................................................................................................................................................................208.5 CONCLUSION AND RECOMMENDATION:...................................................................................................................................21

iv

List of Table

Table 2: Profit & Loss Statement (TZS).............................................................................................................................3Table 3: Summary of Legal Status of the Company......................................................................................................3Table 4: Estimated Incremental Economic Return......................................................................................................5Table 5: List of Farmers and respective location..........................................................................................................7Table 6: Sources of Raw Material........................................................................................................................................8Table 7: Investment Plan.........................................................................................................................................................9Table 8: Product procurement Cycle...............................................................................................................................10Table 9: Different Product packing sizes.......................................................................................................................11Table 10: Customers Value of sale & country of Destination...............................................................................12Table 11: Annual Sales Trend Monthly 2010/11.......................................................................................................14Table 12: Demand per Customers....................................................................................................................................14Table 13: The Proposed Prices of Products..................................................................................................................15Table 14: Financing Plan(TZS)...........................................................................................................................................16Table15: Sensitivity Analysis Production Investment.............................................................................................16Table 16: Impact and mitigation.......................................................................................................................................21

v

EXECUTIVE SUMMARY

XXXXXX.

vi

SECTION ONE

INTRODUCTION

1.1 Background and the Purpose of the Investment Twaweza Microfinance Limited was incorporated under the companies Ordinance

(Cap 212) on February 2013. TM’s mission is to gear the war against poverty

through provision of loan services mainly to the working poor as well as small and

medium sized entrepreneurs. TM aims at empowering disadvantaged people

integrating a commercial approach into a broad human development framework

within the United Republic of Tanzania.

The Company was founded by Dr. XXX and Mr. XXX who, along with Mr.XX, are

actively managing the company. TML has already started a micro lending pilot

project in Dar-City and has scheduled to roll it out to 200 families in the City

(underserved area in Dar-Es-Salaam city), by the end of 2019, in collaboration with

other stakeholders.

1.2 Company’s ObjectivesTwaweza Microfinance Limited objective is to provide loans to small and medium

enterprises covered within the overall framework and mandate of Twaweza

Microfinance Limited. The specific objectives include;

i. To assist the low income population to build their credit worthiness, and to

finance business expansion, education, and other critical requirements of

livelihood;

ii. To promote equity by enabling the working poor to lift themselves from

poverty through financing their economic activities as they continue to grow;

iii. To promote a credit culture amongst small, and medium entrepreneurs

within Tanzania.

1.3 Company’s Vision and Mission

1

1.4 Share HoldersThe number of share holder is shown in the table below

Name of Shareholder Number of Shares Percentage

Mr. Emmanuel MallyaXX XX%

Mr. Mike Mosha XX XX%

Mr. XXXXX XXX XX%

Detail about the shareholders and issued shares can be seen in the memorandum of

association as attached in attachment one.

1.5 Current Projects

What are the current projects ……

1.6 Strategic Goal for 2014-2019

TML intends to reach out to 7,000 poor families in Tanzania with microloans in the

next five years main focus areas will be Kinondoni area, Mwenge, Ubungo, Tabata,

Kinyerezi, Chanika and Kigamboni. Achieving this goal TML will expand its business

in 2019 to Pwani Region. TML management philosophy is to gain self sufficiency

within five years. For that purpose, the management restricts the fundraising

portion with a declining percentage of 100% in year one down to 55%, in year two,

50% in year three and 30% in year four. In 2019, EEA does not expect to require any

more grants/loan.

1.6 Past Financial Performance

Based on the promoter’s financial records, it was evident in the preparation of this

business plan that the records are well kept which has enabled preparation of

audited financial statements. Summaries of the promoter’s financial statements are

as shown below.

2

Table 1: Profit & Loss Statement (TZS)

Particulars 2011 2012 2013

Gross Income

Gross Profit

Net Profit

Net Profit Margin

Sources: Audited Report 2013

From this performance, the company has been handling substantial amount of money

in revenue. The gross profit margins approximately X% and net profit margins of the

company are very low/high about (X%), which gives the shareholders very little

/good returns.

Table 2. Summarise Balance Sheet (TZS)

DESCRIPTION YEARS

  2011 2012 2013

Fixed Assets

Current Assets

Current Liabilities

Net current

Assets 

Total Asset

Source: Extracted from the audited accounts

The balance sheet summarized in Table 2 above shows increases in total assets over

years. The increase is a result of accumulated profit, stocks and acquired assets

which has increased both current assets and fixed assets.

3

1.7 Legal status

Twaweza Microfinance Limited is a legal entity and has acquired all legal certificates

and documents needed to operate microfinance business. Some of the legal

requirements fulfilled include:

Table 3: Summary of Legal Status of the Company Company name TWAWEZA MICROFINANCE LIMITED

Company’s Registration Number XXXXX on the XXX February 2013

Place of registration Dar es Salaam, Tanzania

Company Type Private Company Limited By Shares

Business Type Microfinance

VAT & TIN Number 40-XXXX and 111-XXX

Business License ……………….

MICROFIANCE Lisence NO. XXXX

XXXXX If any

1.8 Purpose of the DocumentThe company intends to increase its loan portfolio so as to reach more clients in Dar

es Salaam. Therefore this study is looking at the profitability of the company and

rationally of expanding loan distribution channels and coverage to meet the

customer growing demand. The expansion program is coupled with financial

limitations. These necessitate the company to look for financial leverage from

financial institutions in terms of long term and short finance.

Furthermore, the study analyzed the company financial status, management

structure, security and established projection of customer demand in the next five

years and financial need for the implementation of this project. The final output is a

business plan which looks into the economic and financial viability of undertaking

these investments.

4

SECTION TWO

MACROECONOMIC SITUATION IN TANZANIA

2.1 Microeconomic Background

Despite the high urbanization rate of Dar-Es-Salaam Region (93.9 %) and the narrow to the

capital, the Ilala Kinondoni and Temeke Districts are defined as an urban agriculture sector.

Only a quarter of an entire population is involved in non-agriculture, mainly in the Informal

Sector (95 % – URT, 2008). Typical small scale businesses include: street vendors, shop

sales workers, and crafts men. Majority of people work in petty cash businesses in which

they can buy only the food of the day. Although the poverty rate is only the half of the

country average, Dar es Salaam residents do not have savings for retirement, medical

expenses, life insurance, or plan for sending children to school.

Agriculture activities are based on small and large scale crop farming mostly using poor

hand equipments. GDP per capita for Dar-Es-Salaam estimated to be USD 667 with 35% of

the population earning an average low income of USD 34 per month (URT - Dar-Es-Salaam

City Profile, 2004).

2.2 Market

According to a study of PRIDE (Promotion of Rural Initiative and Development Enterprises),

a major microfinance oriented NGO, ―it is estimated that there are close to twelve million

small and micro entrepreneurs who need financial services, and the number is growing by

4% percent annually, the majority of whom are found in the rural areas (PRIDE, 2011). ‖That is 20% of the country‘s population, mainly dealing in the informal sector.

At the beginning of their microfinance activities, TML is focusing on the urban informal

sector working poor. This sector contributes 43% of the country GDP. Also it contributed

35% to the total urban labor force (URT, 2009). In Dar-Es-Salaam Region, the informal

sector offers about 65% of the city's labor force (URT, 1995). Nearly two of three urban

households own informal enterprises (URT, 2003).

TML decided to boost informal sector by providing financial services to their actors.

Although there are contradicting views regarding the relationship between poverty and the

informal sector, without it, the poverty situation of the affected families would have been

much worse (Orlando, 2001).

5

2.3 Clients

Customer profile is based on survey results explored by Finscope, ―a comprehensive

national survey focused on the financial services needs and usage across the entire

Tanzania population (Finscope, 2007). The TRIODOS Bank highlighted following ‖characteristics of the potential microfinance clients:

2.3.1 Population

57% of the adult population is less than 34 years, and mainly rural-based (72%). In

addition, there are approximately 14 Million people under 16 years.

2.3.2 Financial access

A large segment (40% overall; 45% of urban, 55% of rural) of the adult population has no

access at all to financial services, either formal or informal (overall, 14% have a formal bank

account (11% men, 5% women, 16% urban, 4% rural), 8% have access to semiformal

finance [NGOs, Saving And Credit Co-Operative Societies – SACCOs] and 35% have access to

informal finance like ROSCAs/ASCAs and moneylenders – these categories are mutually

exclusive). Only 20% of the population has access to formal bank in a 1 hour walking

distance.

2.3.3 Financial literacy

This is generally low, and lower still for women and for people living in rural areas (92% of

the population has heard of loans, but 84% do not understand how interest rates work, or

collateral, guarantors, opening an account etc.; 27% have never heard of a savings account).

Beyond loans and savings, financial literacy is close to nil (e.g. on insurance, Automatic

Teller Machines).

2.3.4 Sources of income

Only 4% of the population is employed in the formal sector. Most people make a living from

agriculture, either by selling food crops (36%), cash crops (12%), cattle/livestock produce

(9%), or livestock (11%). Others run an informal small business (28%), not (directly)

related to agriculture. A large majority of people (61%) go without cash income at times.

Many (28%) depend on getting money from family and friends.

6

2.3.5 Use of credit and loan facilities

Of those that borrow, most (38%) turn to family and friends. An additional 33% get loans

from kiosks, 23% borrow in-kind (e.g. livestock). Only 4% have a loan from a bank (5% of

men, 1% of women). SACCOs and MFIs (Microfinance Institutions) serve only a small

percentage of all borrowers (9% and 6% respectively).

2.3.6 Use of savings facilities

Most people with money do not save it with a bank or financial institution. Of those who

save, four out of ten favor saving in-kind (even more so in rural areas) and three out of ten

say they keep money in a secret hiding place (similar for urban and rural). Another

interesting aspect is that of the people with a bank account (9%), many save with or borrow

from informal providers (48%), SACCOs (26%) or MFIs (15%).

7

SECTION THREE

BUSINESS ENVIRONMENT ANALYSIS

3.1 Location of the Investment, TWAWEZA Microfinance Limited is located in XXX Kinondoni district situated XXX km from city centre The promoter investment is very close to customer intended to be supplied with Serengeti Breweries Products. Mwananyamala is at the centre of Kinondoni area, Msasani, Kijitonyama and Mikocheni area.

3.2 Transport Network:Transport communication network in Dar es salaam is good as all roads are passable throughout the year. The promoter’s investment is easily accessible throughout the year which make possible for the targeted customers walk into Twaweza for credit and for repayments. The promoter is strategically located with higher visibility to the intended customers which make it easier to deliver products whenever needed.

3.3 Quality Control of ProductsIn order to ensure high quality products are delivered to esteemed customers, the promoter will employ staff with proven good track record in credit management, customer care and experiences in microfinance. This will minimize customer complaints about delayed credits, loan repayment hence customer retention.

3.4 System of Record Keeping Currently the company has a robust system of keeping record that ensures the repayment and disbursements are done on time. Despite existence of such system the promoter are intending to buy more sophisticated system of record management. The promoters have set aside TZS 3.5 million to acquire the system.

3.5 Investment plan

The promoters plan to add three more truck and a pickup to add to the two existing trucks to assist in delivering small quantities of products to its customers. Currently, the promoter sometimes hires truck to deliver products to customers whenever there is big order to deliver. The plan therefore, will enable the company to procure products from SBL on time and delivery to customers and cut down the cost of hiring trucks and ensure safety of the product. The plan to procure two trucks will cost the company TZS 25million each. See details below

Table 7: Investment Plan (TZS)

Promoters Equity Loan TotalLand Buildings 3,560,000 3,560,000Fixtures and Fittings 6,400,000 6,400,000Motor vehicles 13,200,000 13,200,000Pre - Operational Expenses 3,250,000 3,250,000Total Fixed Investment 26,410,000 - 26,410,000Working Capital 30,000,000 50,000,000 80,000,000Total 56,410,000 50,000,000 106,410,000

Contribution Margin 53.01% 46.99% 100.00%

8

3.6 Pricing StructureTML charges 6% monthly interest using flat balance calculations. TML also charges an upfront application fee of TZS 10,000 on all loans at the time of disbursement. All lending has been transacted in local currency, with no indexing to external values. The management decided to take a lower interest rate than the market average, which would attract more customers at the beginning and is in accordance to the Poverty Reduction Strategy of the Tanzanian government. If the profitability projections turn out to be unacceptable, it will re-price the loan product again.

3.7 Loan Amounts and Repayment ConditionsAt the beginning of 2014, TML will offer a single loan product in Dar-Es Salaam Region. Clients are required to put up a loan guarantee. TML will not offer a grace period on repayments. Contractual loan terms varied between 1 and 3 months, it is projected that in general clients took an extra month to fully repay their loans.

3.8 Credit RiskCredit risk is defined as a potential loss that is indicated when a borrower fails to repay a loan. TML‘s risk prevention and collection strategy depend on the reason for the imminent default: unwillingness or financial distress. Biweekly and monthly collection procedures are part of an early risk recognition system based on ongoing customer evaluation provided by the loan officers. Different approval levels (loan officer – manager –credit supervisor) should ensure a high quality loan application process. A borrower who is in financial distress and is willing to repay their loans will be transferred to a flexible loan. A flexible loan reduces the installment size and extends the maturity depending on the customer payment ability. The company will hire an internal auditor to implement a risk management system following the Basel II requirements.

3.9 Liquidity Risk

Liquidity risk management will be done by the Finance Committee which ensures that funding commitments can be met on time. For that purpose, TML has considered a sufficient liquidity margin in their model.

3.10 Operational RiskOperational risk is a main issue for a start up in finance with their limited resources. Employees who are overloaded, undertrained or underpaid are the primary driving force behind errors, fraud and mismanagement. TML decided to serve and educate their employees from the beginning in a competitive manner. This serves to increase their identification with the company. To ensure proper operational procedures, reasonable controlling systems will be developed from the beginning and will be managed by the Executive Committee. An operational margin is implemented in the model to handle any operational losses and liquidity gap.

9

SECTION FOUR

MARKETING ASPECTS

4.1 Product

Twaweza Microfinance Limited is a purely financial trading company which sells credit to its

targeted groups which are small and medium enterprises that is not served by the banking system.

4.2 Market and size and Competition

The promoter’s main market is Dar es Salaam market specifically Kinondoni areas, Msasani,

Mwananyamala, and Kijitonyama a

The industry has many competitors from within Tanzania and outside. The main driving factor

being time taken to approve microcredit and costs associated to it. However despite the existing

competition the micro credit market is so huge as supported by the following evidence: 54% of the

Tanzanian adult population are financially excluded and do not use either formal or informal

financial products. Only 9% of the population use formal services and 1% use formal other financial

services. 11% of people have a bank account, which breaks down to 16% in urban areas and only

4% in rural areas. The semi-formal sector comprises 3%, made up of 1% using semi-formal MFIs

and 2% using semi-formal SACCOS. 35% of the population use informal products (including friends

and family) and 15% of the population use friends and family as their sole source of financial

access. This shows that there is still substantial number of people who have not been able to access

microcredit through the existing institutions

4.3 Product Demand and Pricing of Products

Market price both products are fairly stable and largely depend on the market forces. Based on the

market trends for the past two years during the preparation of this business plan, Market

assessment has shown that there have been slight seasonal price fluctuations during Government

change of tax in alcohol products.

Table 11: Annual Credit Sales Trend Monthly

10

January

Febru

aryMarc

hApril may

junejuly

augu

st

septem

bet

0ct0ber

november

decem

ber -

10,000 20,000 30,000 40,000 50,000 60,000 70,000

Year 1Year 2Year 3Year 4Year 5

4.4 Promotion

The promoters will make different campaigns to make its products known to wide community. The

main outlet will be through the existing customers and through leaflets and fliers to be prepared

and marketing campaigns to be launched in the 7th month of operations.

4.5 Targeted Customers

The promoters are targeting the working poor, small and medium enterprises that are not served

by the banking system due to many factors. The costs associated with information on the risk and

creditworthiness of the working poor and SME has discouraged banks from landing related clients.

The target group is big as only 23% of the population has access to formal financial sector

4.6 Marketing Strategy

The promoter will set attractive price (interest) compared to his competitors to attract

customers. Furthermore, the promoter will be advertising his products through media, leaflets and

brochures to inform the targeted customers about its existing products and new once to be

introduced at later stages. Also, the promoter will establish a website where potential customers

will be able to access different information including, prices, how and where to apply for credit.

11

SECTION FIVE

FINANCIAL PROJECTIONS

5.1 AssumptionsIn order to prepare financial projection for the promoter some assumptions were made and these

are as follows

  TWAWEZA MICROFINANCES LIMITED  

  NOTES AND ASSUMPTIONS TO THE ANALYSIS  

1 Production cycle will be stable and will follow the anticipated trends.  

2 The company sells its produce in quantities that do not below TZS200,000 and

not exceeding TZS 3,000,000  

3 The company uses the reducing balance method of depreciation at following

rates:  

 4 Plant and machinery 2.5%

 5 Motor vehicles 20.0%

 6 Furniture & equipment 12.5%

 7 Pre operating Expense 20.0%

9 Interest income is charged on approved credit whereas the bank loan is charged

on outstanding balances.  

5.2 Financing Proposal:

The total investment costs amounts to TZS XX million whereby TZSXXX million is equity finance.

The promoter intends to expand its business by adding new equipments, motor vehicles, hiring

bigger ware house and additional working capital. The financing of the proposed new investment is

as shown in table 14 below and detail can be found in the annex 1.

5.3 Profit and Loss Statement:

The income statement shows that in the first year the net profit after Tax is TZS XXX million, in the

second year the net profit is TZS XX million and keep on increasing to accumulate a net profit of

over TZS XXX million in five years, for more details see annex 7.

12

5.4 Cash Flow Statement:

The Net Cash flow depicts a positive balance of TZS XX million in the first year. The accumulated

cash amount to TZS XXXmillion in the fifth year. The project is able to meet its financial obligations

in the next five years, for details see Annex 8.

5.5 Sensitivity Analysis and Viability of the project:

The Net Present Value (NPV) of the project is TZS XXX and Internal Rate of Return (IRR) is XXX% at

discounting rate of XX %. Both measures suggest the project is financially viable and economically

sound.

5.5 The Balance Sheet:

The company Balance Sheet as shown in the Financial Schedules is positive. The net worth of the

company rises from TZS XXX million in year one to TZS XXX million in year five. It will still have

substantial cash balances investments. For Details see Annex 8 and 9

5.6 Contribution to the Promoter

The investment to be undertaken will increase the invested capital to TZS XXX million which is an

increase of approximately XX%. The investment is expected to increase the promoter’s net income

to approximately TZS XX million in the first year and TZS XX million from the fifth year.

5.7 Employment Creation

The business currently provides fulltime employment opportunities to 5 people who receive

approximately a total of TZS. XX million /= annual salary. The expansion of the business will also

increase the number of people employed. This number is expected to increase with the increase in

the volume of business.

5.8 Government Revenue

The government will receive additional revenue in the form of income tax to the tune of

approximately TZS XX million in the first year and TZS XX million in total in the period of five years.

The total incremental gross incremental return is estimated to contribute to the economy to the

tune of TZS XX million with indirect employment of XxXindividuals.

Table 4: Estimated Incremental Economic Return

Direct Incremental Return to Investment ( TZS in million)

13

Investment Return to

debt

Financin

g

Return to investor and

their employees

Value of goods and services

and people employed

Value of

produce and

farm families

benefiting

Governme

nt revenue

Equit

y

Loa

n

Investor No of

employees

per annum

Wages to

employee

Value of

goods and

services

No of

families

employed

Value of

produce

14

SECTION SIX

HUMAN RESOURCE PLAN AND MANAGEMENT

6.1 Management and OrganizationThe basics tasks and strategy of the management and organization of Twaweza Microfinance

Limited would aim at maintaining high quality distribution services that add value to its customers.

Secondly, it is the only strategy through which the management can achieve high sustainable

returns to its investors. The overall strategic objectives can be stated as follows:

Achieving the distribution and revenue targets in the stipulated timeframe.

Maintaining a high profitability through sound financial control over expenditures and

retain a firm and competitive pricing policy for services and products.

Increasing the value added for company’s product and trading them at the recommended

rates.

To contribute to the development of the local economy (where the company shall be

operating), and the national economy generally through the creation of jobs in the

operations of the company and meeting necessary tax obligations to the government.

The Company will implement its strategic plan through a process of Management by Objectives.

Twaweza Microfinance Limited main foundation blocks will be its employees. The company plans

to carry out on - the - job training for most of its staff. In general the company will ensure that

employees get new skills and follow set procedures to increase their productivity throughout. Skills

will need to be developed that will enable the company to react effectively and efficiently to new

demands and market trends.

The overall management team will be under a Board of Directors and the Management Team

headed by a Managing Director. The Organization Chart can be seen under).

6.2 Board and ManagementTML embraces the organizational leadership model with a leadership team capable of formulating

and shaping a coherent vision combined with a management team skilled in implementing and

rejuvenating the vision over time. This team is comprised of an Executive Director working closely

with Governing Board chair, advisors and members committed to constructing and executing the

strategies. The Manager is responsible for the implementation and management of the vision,

15

specifically in the areas of microfinance, social business and entrepreneurial education. The

management of the company is vested in the Governing Board.

6.3 Key Personnel:

Twaweza Microfinance Limited business has hired permanently 23 personnel at the processing

business and has hired XX personnel on short term contracts that would see the achievements of

the set target. The senior technical staff would include.

Managing Director

Manager

Credit Officer

6.4 Core human resources elements:

The following human resources elements would significantly contribute to Twaweza Microfinance

Limited achievements.

Mr. Emmanuel Mallya who is Managing Director with more than 5 years experience in

the field of management. he will provide strategic leadership, oversight, guidance on the

execution of annual business plans. He will be responsible ensure general achievement of

the business operations specifically making sure that annual and monthly targets are

realized. He is also in-charge of soliciting the business capital and enters into legal

agreements with all third parties including financial institutions.

He is possessing msss..........please complete this area

Ms. XXXXXXX- who is a Manager, she has vast experience in the field of finance and

marketing, she will provide general oversight and manage all sales and operations. She will

be the main point of contact to daily company operations including supervision of and

management of all XXXXX

Name all the personel who will be operating the business, their qualification and

experiences

Security guards their roles will be to ensure general safety of goods and products ,Ensure

safety of staff and company resources, Inspect all orders and certify proper authorization,

Report any irregularities of standard operating procedures, Reports to the general manager

16

6.4 Training and Technical Advice

The promoter has personnel with the necessary knowledge and experience in sales and distribution

of products, and the promoter will consult Consulting firms to provide training for the staff

whenever a need arise.

6.5 Gender considerations

The Promoter provides equal opportunities for both men and women when employing the required

labor for the investment.

6.6 HIV/AIDS Action plan

The promoter will make arrangements with district health centres, NGOs and other HIV/AIDS

campaigner to create awareness and prevention for his supporting staffs. Furthermore the

promoter will provide free condoms to its employees as a way to prevent new HIV/AIDS case.

17

SECTION EIGHT

CONCLUSION AND RECOMMENDATIONS

8.1 SWOT Analysis

8.1.1 Strengths

Twaweza Microfinance Limited as a medium company has the potential for rising up to become a

successful and prosperous alcohol Trading company in the near future. The following are

considered to be, the strengths that the company has at its disposal that can be relied upon to make

the company grow and prosper.

Company is close to its customers which reduce logistical problems for the principal client

to access the services. This enable the company to deliver its services to the customers at

the minimum require time.

The company has competitive management which is able to organize its marketing and

distribution to ensure sustainability of the profitability trend.

8.1.2 Weakness

The promoters have not been able to secured enough collateral to enable the company

obtain commercial long term loan from commercial banks. The few security the company

has been used to obtain an overdraft to boost company’s working capital.

The company profitability margin is very low therefore needs some improvement in its

costing strategy. The focus should be to minimize the direct and operation costs a.

8.1.3 Opportunities

In planning what can be done by the company during the next five years, the consultants have taken

into account the opportunities that exist for the company to increase its net worth. The company

may utilize the available opportunities that exist as follows: -

Promoters’ customers are well spread which reduces the risk of trading with few customers

and many customer have created loyalty to the promoter. Therefore, the promoter has the

advantage of using the existing customers to expand its market base.

18

Furthermore there is expanding market of microcredit in Tanzania (as can be seen in the

last two years expansion of sales). This will enable the promoter to optimize profit as it

expands its business.

8.1.3 Threats

The company is facing various threats in the existing operational environment. These include the

following: -

Competition: the presence of other players in the market is a threat the Twaweza

Microfinance Limited as a player in the market. However, with good management and

adequate capital resources required to achieve targeted products distribution, the

company should be able to gradually raise its market share and compete successfully.

Customers may switch to our competitors. The drop out of major customer will have

damaging effects. The promoters will minimize this risk by having competent personnel

who will also be responsible to get customers feedback (complaints).

8.2 Economic and Social Benefits:

The following are some of the indicators that justify Implementation /expansion of the investment

i. The Internal Rate of Return is XX% and The Net Present Value is at XX% Discount Rate is

TZS XXX

ii. Employment creation both for men and women where the investment will directly and

indirectly employ approximately XXX people at its fully capacity.

iii. The government will receive additional revenue in terms of income tax to a tune of TZS

XXXmillion and increase on average government Trading earnings by TZS XXXmillion

annually

8.3 Financial Benefits:

The Ipinda investment would be very profitable as: -

i. The Promoters net profit will increase to a tune of TZS XXmillion annually after the

expansion programme.

ii. The balance sheet would show the net worthy rise from TZS XX million to TZS XXX at year 5.

19

8.5 Conclusion and Recommendation:

Twaweza Microfinance Company meet all the minimum requirement of which include having a

good lending policy, Well established market base, and offices strategically positioned, and

experienced management in microcredit trading business.

TML investment is technically viable, financially profitable and economically sound for

implementation. We therefore recommend the promoter for a term loan of TZS 50,000,000

charged an interest not exceeding 13% annually which will be repaid over a period of two years

.

20

ATTACHMENT

21

Annex 2. Depreciation Cost  Initial     YEARS  Item Value Rate Method 1 2 3 4 5 6                   

Land & Building                  

Opening Balance 3,560,000 2.5%Reducing

balance 3,560,000 3,471,000 3,384,225 3,299,619 3,217,129 3,136,701 Allowance       89,000 86,775 84,606 82,490 80,428 78,418 Closing Balance       3,471,000 3,384,225 3,299,619 3,217,129 3,136,701 3,058,283 Furniture/Fittings                  

Opening Balance 6,400,00012.5

%Reducing

balance 6,400,000 5,600,000 4,900,000 4,287,500 3,751,563 3,282,617 Allowance       800,000 700,000 612,500 535,938 468,945 410,327 Closing Balance       5,600,000 4,900,000 4,287,500 3,751,563 3,282,617 2,872,290 Motor vehicles                  

Opening Balance13,200,00

020.0

%Reducing

balance13,200,00

0 11,550,00

0 10,106,25

0 8,842,969 7,737,598 6,770,398 Allowance       1,650,000 1,443,750 1,263,281 1,105,371 967,200 846,300

Closing Balance      11,550,00

0 10,106,25

0 8,842,969 7,737,598 6,770,398 5,924,098 Pre operating Expenses                  

Opening Balance 3,250,00015.0

%Reducing

balance 3,250,000 2,762,500 2,348,125 1,995,906 1,696,520 1,442,042 Allowance       487,500 414,375 352,219 299,386 254,478 216,306 Closing Balance       2,762,500 2,348,125 1,995,906 1,696,520 1,442,042 1,225,736 Total Depreciation       3,026,500 2,644,900 2,312,606 2,023,185 1,771,051 1,551,351

Closing Balance26,410,00

0    23,383,50

0 20,738,60

0 18,425,99

4 16,402,80

9 14,631,75

8 13,080,40

7

22

D. OVERHEADS

1 2 3 4 5 6 7 8 9 10 11 12 TotalSr.N

o Particular        

1 Rent 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 2,400,000

2 Electricity 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 600,000

3 Water charges 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 120,000

4 Postage, Fax, and telephones 70,000 70,000 70,000 70,000 70,000 70,000 70,000 70,000 70,000 70,000 70,000 70,000 840,000

5Printings, internet & Stationery 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 1,200,000

6 Fuel 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 2,400,000

8 Bank charges 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 480,000

9 cleaning materials 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 480,000

10 professional expenses 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 3,000,000

  Sub Total:960,00

0960,00

0960,00

0960,00

0960,00

0960,00

0960,00

0960,00

0960,00

0960,00

0960,00

0960,00

011,520,00

0

Sr.No Particular Year-1 Year-2 Year-3 Year-4 Year-5

1 Rent 2,400,000 2,520,000 2,646,000

2,778,300

2,917,215

2 Electricity 600,000 630,000 661,500

694,575

729,304

3 Water charges 120,000 126,000 132,300

138,915

145,861

6 Postage, Fax, and telephones 840,000 882,000 926,100

972,405

1,021,025

8 Printings, internet & Stationery 1,200,000 1,260,000 1,323,000

1,389,150

1,458,608

9 Fuel 2,400,000 2,520,000 2,646,000

2,778,300

2,917,215

23

14 Bank charges 480,000 504,000 529,200

555,660

583,443

15 cleaning materials 480,000 504,000 529,200

555,660

583,443

16 proffessional expenses 3,000,000 3,150,000 3,307,500

3,472,875

3,646,519

  Total11,520,00

012,096,00

012,700,80

013,335,84

014,002,63

2

Revenue Projections (green Colour)

Analysis          Principal 80,000,000        Annnual Interest Rate 72%        Monthly Interest Rate 6.00%        Total number of payments 24        

                      

Payment No. Beginning Balance

Interest Payment

Total Princial and

Interest

Principal Payment

Ending Balance

1 70,000,000 4,200,000 74,200,000 2,083,333 72,116,6672 72,116,667 4,327,000 76,443,667 2,083,333 74,360,3333 74,360,333 4,461,620 78,821,953 2,083,333 76,738,6204 76,738,620 4,604,317 81,342,937 2,083,333 79,259,6045 79,259,604 4,755,576 84,015,180 2,083,333 81,931,8476 81,931,847 4,915,911 86,847,758 2,083,333 84,764,4247 84,764,424 5,085,865 89,850,290 2,083,333 87,766,9568 87,766,956 5,266,017 93,032,974 2,083,333 90,949,6409 90,949,640 5,456,978 96,406,619 2,083,333 94,323,285

10 94,323,285 5,659,397 99,982,683 2,083,333 97,899,34911 97,899,349 5,873,961 103,773,310 2,083,333 101,689,97712 101,689,977 6,101,399 107,791,376 2,083,333 105,708,042

    60,708,042   25,000,000             

24

 

Beginning Balance

Interest Payment

Total Princial and

Interest

Principal Payment

Ending Balance

13 105,708,042 6,342,483 112,050,525 2,083,333 109,967,191

14 109,967,191 6,598,031 116,565,223 2,083,333 114,481,890

15 114,481,890 6,868,913 121,350,803 2,083,333 119,267,470

16 119,267,470 7,156,048 126,423,518 2,083,333 124,340,184

17 124,340,184 7,460,411 131,800,595 2,083,333 129,717,262

18 129,717,262 7,783,036 137,500,298 2,083,333 135,416,965

19 135,416,965 8,125,018 143,541,982 2,083,333 141,458,649

20 141,458,649 8,487,519 149,946,168 2,083,333 147,862,835

21 147,862,835 8,871,770 156,734,605 2,083,333 154,651,271

22 154,651,271 9,279,076 163,930,348 2,083,333 161,847,014

23 161,847,014 9,710,821 171,557,835 2,083,333 169,474,502

24 169,474,502 10,168,470 179,642,972 2,083,333 177,559,639    96,851,597   25,000,000             

25

Loan Repayment Schedule          

Analysis          

Principal 50,000,000        

Annual Interest Rate 13%        

Monthly Interest Rate 1%        

Moratorium (Months)

3        Interest on drawdown          Total Loan Principal after Moratorium 50,000,000        Total number of payments 5        

                      

Payment No. Beginning Balance

Monthly Payment

Interest Payment

Principal Payment

Ending Balance

1 50,000,000 2,380,952 540,000 1,840,952 48,159,0482 48,159,048 2,380,952 520,118 1,860,835 46,298,2133 46,298,213 2,380,952 500,021 1,880,932 44,417,2814 44,417,281 2,380,952 479,707 1,901,246 42,516,0365 42,516,036 2,380,952 459,173 1,921,779 40,594,2566 40,594,256 2,380,952 438,418 1,942,534 38,651,7227 38,651,722 2,380,952 417,439 1,963,514 36,688,2088 36,688,208 2,380,952 396,233 1,984,720 34,703,4889 34,703,488 2,380,952 374,798 2,006,155 32,697,334

10 32,697,334 2,380,952 353,131 2,027,821 30,669,51311 30,669,513 2,380,952 331,231 2,049,722 28,619,79112 28,619,791 2,380,952 309,094 2,071,859 26,547,932

26

    28,571,429 5,119,361 23,452,068             

 Beginning

BalanceMonthly Payment

Interest Payment

Principal Payment

Ending Balance

13 26,547,932 2,380,952 286,718 2,094,235 24,453,69814 24,453,698 2,380,952 264,100 2,116,852 22,336,84515 22,336,845 2,380,952 241,238 2,139,714 20,197,13116 20,197,131 2,380,952 218,129 2,162,823 18,034,30717 18,034,307 2,380,952 194,771 2,186,182 15,848,12518 15,848,125 2,380,952 171,160 2,209,793 13,638,33319 13,638,333 2,380,952 147,294 2,233,658 11,404,67420 11,404,674 2,380,952 123,170 2,257,782 9,146,89221 9,146,892 2,380,952 98,786 2,282,166 6,864,72722 6,864,727 2,380,952 74,139 2,306,813 4,557,91323 4,557,913 2,380,952 49,225 2,331,727 2,226,18624 2,226,186 2,250,229 24,043 2,226,186 0    28,440,705 1,892,773 26,547,932             

27

INCOME & EXPENDITURE STATEMENT         

  PARTICULARS Year-1 Year-2 Year-3 Year-4 Year-5

  INCOME            Income 60,708,042 96,851,597 78,779,819 78,779,819 78,779,819  Total Sales 60,708,042 96,851,597 78,779,819 78,779,819 78,779,819               TOTAL REVENUE 60,708,042 96,851,597 78,779,819 78,779,819 78,779,819             

  EXPENDITURE            Overheard costs 11,520,000 12,096,000 12,700,800 13,335,840 14,002,632

  Manpower 27,720,000

27,720,000

27,720,000

27,720,000

27,720,000

  TOTAL EXPENDITURE 39,240,000 39,816,000 40,420,800 41,055,840 41,722,632               GROSS SURPLUS (YEARLY) 21,468,042 57,035,597 38,359,019 37,723,979 37,057,187  Deprecition 3,026,500 2,644,900 2,312,606 2,023,185 1,771,051   Interest on loan 5,119,361 1,892,773                     Profit before Tax 13,322,181 52,497,923 36,046,414 35,700,794 35,286,136  Average Tax (30%) 3,996,654 15,749,377 10,813,924 10,710,238 10,585,841               NET PROFIT (POST TAX DEDUCTIONS) 9,325,527 36,748,546 25,232,490 24,990,556 24,700,295  retained Earnings 9,325,527 46,074,073 71,306,563 96,297,119 120,997,414

             

28

  Profit (%) on Income (Post Tax) 15.36% 37.94% 32.03% 31.72% 31.35%  Profit (%) on Expenditure (Post Tax) 23.77% 92.30% 62.42% 60.87% 59.20%  Return (%) on Investment (Post Tax) 16.53% 65.15% 44.73% 44.30% 43.79%  Return (%) on Equity (Post Tax) 41.82% 59.94% 78.05% 96.17% 114.28%  Profit (%) on Income 35.36% 58.89% 48.69% 47.89% 47.04%  Profit (%) on Expenditure 54.71% 143.25% 94.90% 91.88% 88.82%  Return (%) on Investment 34.16% 49.41% 64.66% 79.90% 95.15%  Return (%) on Equity 56.94% 82.35% 107.76% 133.17% 158.58%

Monthly Income Statement

PARTICULARS 1 2 3 4 5 6 7 8 9 10 11 12

CAPACITY UTILIZATION 60% 75% 90% 90% 90%

INCOME          

Income4,200,00

04,327,00

04,461,62

04,604,31

74,755,57

64,915,91

15,085,86

55,266,01

75,456,97

85,659,39

75,873,96

16,101,39

9

Total Income4,200,00

04,327,00

04,461,62

04,604,31

74,755,57

64,915,91

15,085,86

55,266,01

75,456,97

85,659,39

75,873,96

16,101,39

9

           

TOTAL REVENUE4,200,00

04,327,00

04,461,62

04,604,31

74,755,57

64,915,91

15,085,86

55,266,01

75,456,97

85,659,39

75,873,96

16,101,39

9

           

EXPENDITURE          

Overheard costs 960,000 960,000 960,000 960,000 960,000 960,000 960,000 960,000 960,000 960,000 960,000 960,000

Manpower 2310000 2310000 2310000 2310000 2310000 2310000 2310000 2310000 2310000 2310000 2310000 2310000

TOTAL EXPENDITURE3,270,00

03,270,00

03,270,00

03,270,00

03,270,00

03,270,00

03,270,00

03,270,00

03,270,00

03,270,00

03,270,00

03,270,00

0

           

GROSS SURPLUS (YEARLY) 930,0001,057,00

01,191,62

01,334,31

71,485,57

61,645,91

11,815,86

51,996,01

72,186,97

82,389,39

72,603,96

12,831,39

9

Deprecition 252,208 252,208 252,208 252,208 252,208 252,208 252,208 252,208 252,208 252,208 252,208 252,208

Interest on loan 426,613 426,613 426,613 426,613 426,613 426,613 426,613 426,613 426,613 426,613 426,613 426,613

           

Profit before Tax 251,178 378,178 512,798 655,495 806,754 967,0891,137,04

41,317,19

61,508,15

71,710,57

51,925,13

92,152,57

7

Average Tax (30%) 75,353 113,453 153,839 196,649 242,026 290,127 341,113 395,159 452,447 513,173 577,542 645,773

29

           NET PROFIT (POST TAX DEDUCTIONS) 175,825 264,725 358,959 458,847 564,728 676,962 795,931 922,037

1,055,710

1,197,403

1,347,597

1,506,804

retained Earnings 175,825 440,550 799,508 1,258,35

5 1,823,08

3 2,500,04

6 3,295,97

6 4,218,01

3 5,273,72

3 6,471,12

6 7,818,72

3 9,325,52

7

Yearly Cash Flow  1 2 3 4 5Cash inflows          Equity 56,410,000        SELF Loan 50,000,000        Profit before Capital Charges 21,468,042 57,035,597 38,359,019 37,723,979 37,057,187 Total Cash Inflows 127,878,042 57,035,597 38,359,019 37,723,979 37,057,187Cash Outflows          Fixed Assets 26,410,000        Initial working capital 80,000,000        Corporate tax 3,996,654 15,749,377 10,813,924 10,710,238 10,585,841 Loan repayment 28,571,429 28,440,705      

Total cash outflow 138,978,083

44,190,082

10,813,924

10,710,238

10,585,841

Net cash flow -11,100,041 12,845,514 27,545,095 27,013,741 26,471,347Cumulative cash flow -11,100,041 1,745,473 29,290,569 56,304,310 82,775,656

30

BALANCE SHEET

Annex 9. Balance Sheet Projections

DESCRIPTIONYEARS

1 2 3 4 5CURRENT ASSETS        Cash 11,100,041- 1,745,473 29,290,569 56,304,310 82,775,656 Working Capital 80,000,000 80,000,000 80,000,000 80,000,000 80,000,000 Total Current Assets 68,899,959 81,745,473 109,290,569 136,304,310 162,775,656 FIXED ASSETS (NET DEP.)        Land and Buildings 3,471,000 3,384,225 3,299,619 3,217,129 3,136,701 Furniture and fittings 5,600,000 4,900,000 4,287,500 3,751,563 3,282,617 Motor vehicles 11,550,000 10,106,250 8,842,969 7,737,598 6,770,398 Pre operating Expenses 2,762,500 2,348,125 1,995,906 1,696,520 1,442,042 Total Fixed Assets 23,383,500 20,738,600 18,425,994 16,402,809 14,631,758 TOTAL ASSETS 92,283,459 102,484,073 127,716,563 152,707,119 177,407,414          REPRESENTED BY:        Equity 56,410,000 56,410,000 56,410,000 56,410,000 56,410,000            Retained Earnings 9,325,527 46,074,073 71,306,563 96,297,119 120,997,414 Loan 26,547,932 -      TOTAL 92,283,459.21 102,484,073.42 127,716,563.04 152,707,119.08 177,407,414.34

31