BUSINESS PLAN

TABLE OF CONTENTS

Tumaini micro-credit it is a financial institution which will be established in 2018 at Dodoma region near sabasaba market, the organization will be formed with the purpose of providing social, economic and financial solution to the poor.

The founder of an organization is AGUSTINO B.MWACHA who will be the manager of an organization, TMI intend to reach 1,000 clients most of them will be small and micro enterprises around sabasaba market, middle income people for instance teachers and other government employees who have ability to repay back the loan. In order for Tumaini microfinance to operate well in providing financial services to its customers it will need 30 million Tshs ,whereby 20 million will be a loan from bank,5 million owners’ equity and another 5 million will be raised fund from different people especially relatives and friends.

The institution will be a leading micro-finance institution in Dodoma region because an initiator of an institution is a microfinance expert and other business studies who have a bachelor degree in micro-finance and enterprises development.

2.0 BUSINESS DISCRIPTION

Tumaini micro-credit Institution(TMI),it is an institution that will be established to provide business consultation and loan services to small entrepreneurs, small and micro enterprises , middle income people and those with low income who are in need of fund to undertake different entrepreneurial activities and fulfill some social needs when arise such as medical fee, school fee, to cover funeral expenses and wedding ceremony expenses most of these services are not provided by formal financial institutions. Tumaini micro-credit will be located in Dodoma region near Sabasaba market the reason for its location it’s because of the presence of Sabasaba market which accommodates large number of small entrepreneurs.

2.1 Vision statement

Ø To reach the unreached people in the society and improve their well being.

2.2 Mission statement

Ø To provide quality and cheap services to the clients that will enable them to improve their life.

2.3 Objectives of Tumaini micro-credit institution

a) To help small entrepreneur and small/micro-enterprises to expand their business by granting cheap loans.

b) To provide business consultation to small entrepreneurs and low income. people who want to undertake or expand their business so as they can generate profit and conduct their business ethically, ethically means following legal procedures when undertaking such business.

c) To help (TMI) clients when they facing social problems such as funeral, ceremony expenses heath problems by granting cheap loans.

2.4 Industry analysis

A summary of all relevant MFIs in Tanzania was provided by PRIDE Tanzania (PRDE,2007). Hereafter, besides PRIDE, the most influential NGOs are FINCA (Tanzania small enterprise Development Agency (SEDA) and Presidential Trust for Self-Reliance(PTD).Small NGOs are YOSEFO,SELFINA Small industries Development (SIDO),poverty Tanzania Gatsby Trust, the Zanzibar based Woman Development Trust fund. Some minor institutions known as community based organization (CBOs) are dealing throughout the country the following Banks are providing financial solution to the poor Tanzania Postal Bank, National Microfinance Bank (NMB), Akiba Commercial Bank (ACB).

All of the mentioned above both formal and informal financial institutions provides competition for TMI existence as financial service provider to the low income people, as new entrant to the industry first of all industry analysis will be made by making SWOT analysis so as to determine competitors strength,weakness,opportunities available and threats and this analysis will give TMI a competing advantage of entering into the market by using their weakness and utilizing opportunities available hence TMI will be at the better position of surviving in financial industry.

2.5 Structure

TMI will basically base on providing financial services to the community members who are in need with finance. The business is intended to be a sole proprietorship owned by a single person who is AGUSTINO B.MWACHA. Tumaini micro-credit institution will use the following business supporting tools to support the business, advertising using different local radio’s such as radio Mwangaza and radio Kifimbo fm, promotions in terms of reducing interest rate especially to encourage people to repay their debts early and also good customer service so as to attract more customers.

2.6 The product or services TMI intend to market

Ø Loan products of different kinds which includes emergency loan, education loan and business loan

Ø Business consultation, business consultation will be provided to TMI clients so as they can conduct their business profitably and be able to repay back the loan taken

Ø Micro-leasing and leasing especially for Bajaj and bodaboda for transportation activities,this services will be provided to those who want to undertake a certain activity but they don´t have a means of conducting such activity therefore TMI will buy such product on behalf of a customer and lease to him or her and he or she will be required to pay such obligation slowly until the full amount recovered.

2.6.1 The business will be successful due to the following reasons

Ø It is well organized business because the manager of TMI is an expert in micro-finance and other business studies

Ø The location of it is superb at Sabasaba market(this is a permanent market which found in Viwandani ward in Dodoma Municipal) where there is a lot of small businessman

Ø Competitive interest rate, that means a reasonable interest rate that will not act as a burden to the TMI clients and help them to repay the loans with interest timely.

3.0 MARKET STRATEGIES SEGMENT

3.1 MARKET DEFINITION

When define market the following parts must be covered

· Market segmentation

· Market size

· Market share

3.1.1 Market segmentation

According to a study of PRIDE (Promotion of Rural Initiative and development enterprises), a major microfinance oriented NGO,”It estimated that there are close to eight million small and micro entrepreneurs who need financial services, and the number is growing by 4% annually, the majority of whom are found in the rural areas”(PRIDE,2009).that is 20% of the country´s population, mainly dealing in the informal sector.

People of different income levels and occupations they are in need of finance so as they can solve various social and economic challenges but TMI intended to serve low income earners, middle income earners, and small entrepreneurs by offering services that satisfies their needs.

3.1.2 Market size

According to the census 2012 the population of Dodoma urban District was 410,956, TMI intended to provide its services to more than 1000 people that include businessmen, micro enterprises and small-entrepreneurs who conduct their business in sabasaba market and this will be achieved due to the presence or location of TMI near sabasaba market and other low income people around Dodoma Urban District.

3.1.3Market share

TMI as new institution in a market intend to capture 25% of the total market share but the total market share will increase as time goes due to provision of better services that will attract more new clients and retaining existing ones.

4.0 BUSINESS POSITIONING

Involves three things

· Competitors’ positioning

· Product uniqueness

· Business positioning (TMI)

4.0.1 Competitors positioning

In micro-credit or micro-finance sector recently it seems as a profitable business as a result of it there is a lot of micro-finance exist in the market in which they compete at each other but at the same time competing with formal financial institutions(commercial banks).each micro-finance or micro-credit compete to retain its market share and also increase its market share at expense of utilizing other’s weakness, as a result they offer better services which made them to position well in the market.

4.0.1.1 Product uniqueness

TMI products will be unique compared with its competitors due to the following reasons

· The interest rate offered will be a reasonable one, that will enable TMI to cover the cost of operations and clients to repay back their loan

· Small loans up to 20,000/= TSHS amount that is not granted by other financial institutions

· Business consultation to small entrepreneurs before TMI grants loans to them this will be done to ensure they generate profit and be able to repay their obligations.

· Collateral free to clients with strong repayment capacity also a title deed of owning kibanda in the market will be used as collateral for granting loan to those with weak repayment capacity and those who are at the initial stage of establishing a business.

· Micro-leasing especially for Bajaj and bodaboda.

· Funeral and wedding ceremony loans, which is not provided by the most of MFI’s and formal financial institution.

4.0.2. Business positioning

After market research taken by the business TMI will be at the position of identifying areas in which the institution holds a competitive and comparative advantage over its competitors so that it can build on its own strengths and capitalize on other’s weakness this could be in terms of low transactions cost, low interest rate, high quality customer services, quick loan processing and professional services offered by professional employees, hence TMI will occupy a distinct competitive position in the mind of the target customers

4.0.2 Pricing/Interest rate

Interest rate that will be charged will cover the following costs, administrative expenses, inflation and depreciation, the cost of loan losses and the cost of funds applied in lending activities, at the begging TMI will use penetration pricing strategy which will be appropriate in capture a market easily since the price of interest rate will be low compared with its compititors. Since interest rate is issued by the government via central bank and its often range from 18% up to 26%, TMI will choose the lower one which will be 18%.

4.1 DISTRIBUTION

TMI will use direct sales or direct services to its clients as a way of delivering its services and this will be the best way of delivering its services to the clients due to the following reasons

· It will enable TMI to establish good relationship with it customers

· It will be easy for TMI to identifying borrower’s needs and satisfy them accordingly.

· It will enable TMI to gather necessary information to review the application

· And last direct service will enable TMI to communicate to its client standard, policies and product offered

4.2 PROMOTION PLAN

It will involve advertising TMI products and services though public relations, the use of local radios, brochures, and the use of posters that will be allocated in different areas in Dodoma that will describes the types of products offered by TMI

5.0 COMPETITIVE ANALYSIS SEGMENT

Competition is an essential component of free market economy, business must strive to produce the highest quality products or provide the best services at lowest prices in order to win consumer acceptance and support.

TMI facing competition from both microfinance or micro-credit institutions and formal financial institutions for instance commercial banks. After TMI studying its competitor’s strength and weaknesses, TMI will come up with the following strategies that will enable TMI to beat its competitors and capture or increase its market share

5.1 Competitive edge (how to capitalize competition)

Ø TMI will base to provide its financial services to those people with low income level who are excluded to access financial services in formal financial institutions and TMI will provide services that will satisfies their needs.

Ø TMI will offer lower interest rate to its clients compared to its competitors and this will act as strategy to penetrate into the market

Ø TMI will employ professional employees with required qualification for stance they will be a professional credit officer who will deal with loan disbursement, monitoring, and collection, secretary, accountant and manager who are qualified.

Ø TMI will use different promotional tools to advertise its financial products to the customers by using different ways for stance TMI will use local radios and other promotional tools available to advertise its services.

6.0 DESIGN AND DEVELOPMENT SEGMENT

6.1 Goals for product development

Ø To satisfied clients demands

Ø To increase clients outreach

Ø To capture new clients

Ø To beat competitors

Ø Portfolio diversification so as to avoid the risk of providing loans to one market segment which may result to huge loss if such market segment incurs covariant risk.

6.1.1 PROCEDURES

New product development is a process that will consists of four district phases

· Identification and preparation: After TMI identify the products wants to offer or develop then it have to prepare itself in terms of mobilize staff and other resources to work plan, Staff that will be mobilized include product champion who will lead the team and cross-functional team provide assistance to product champion.

· Product design and development: A design and development of prototype involve drafting the initial features and characteristics of new ideas to design prototype the development team must understand client’s needs and the competitive landscape to determine what client will buy.

· Pilot testing of the prototype is an opportunity to offer the product to a sample group of clients to determine if there customers need and will buy the product TMI will choose sabasaba for the prototype to be tested.

· Product lunch, this will be the last stage in product developing, this stage comes after pilot test showing positive result involve introducing the product into the entire market and TMI will use different promotional tools to make sure that its product is known to the public after being developed or refined .

6.1.2 Development budget

Cost that should be included in the development budget include the following

Administrative expenses

ITEMS	Salaries in Tshs.
· Manager	800,000
· Accountant	550,000
· Credit officer	550,000
· Secretary	400,000
Total amount	2,300,000
Other overheads
· Rent	50,000
· Phone	150,000
· Water and electricity bills	30,000
Total overheads costs	230,000
· Miscellaneous cost	500,000
· Advertisement costs	500,000
TOTAL	1,000,000
THE GRAND TOTAL	3,530,000

6.2 PERSONAL

During the product development the product development team will consist, product champion (Manager) and cross functional team (Department members)

Responsibilities of each is as followers

Ø Product champion (Manager)

· To oversee and guide the entire process

· To manager cross functional team and keep them on truck

· To set work schedules and maintain momentum behind the project

Role of cross functional team during product development (Department members)

· To focus on specific objectives and responsibilities to work as team to improve coordination and innovation across division and resolve problems.

7.0 RISK ASSESSMENT SEGMENT

Ø TMI as financial institution facing a lot of risks such as financial risks, operational risks and strategic risks but common risks that faces TMI include the following risks,

Credit risk is the most frequently addressed risk for an Institution is the risk to earnings or capital due to borrowers late and non-payment of loan obligations.

7.1 Measures to control credit risk

· Well-designed borrowers screening

· Carefully loan structuring

· Loan monitoring

· Clear collection procedures

· Active oversight by senior management

· Good portfolio reporting

7.1.1 Liquidity risk, failure of an MFI to meets its obligation to meet client withdrawals, disburse loans and fund unexpected cash shortages, usually rises from management inability to adequately anticipate and plan for changes in funding sources and cash needs

How to manage liquidity risk

· Maintain detailed estimates of projected cash inflows and outflows for the next few weeks or months so that net cash requirement can be identified

· Maintain investment account that can easily be liquidated or lines of credit with local banks to meet unexpected needs

7.1.2 Interest rate risk, arises from possibility of change in the value of assets and liabilities in response to change in market interest rates

Two common approaches to interest rate risk,

· to reduce mismatch between short term variable rate liabilities and long term fixed rate loans to boost profitability

· Operational risk, the risk arises from human or computer error within daily product delivery and services.

Causes of operational risks

· Inadequate technology and information system

· Operational problems

· Insufficient human resources and breaches of integrity(Fraud)

7.1.3 Operational risk categorized into two transaction risk and fraud.

Ø Transaction risk, exist in all products and services and it is a risk arise in a daily bases of organization as transaction are processed.

TMI key steps to reduce transaction risk include

· Simple and consistent procedure for cash transaction

· Effective ex-ante internal control

· Strong ex-post internal control

· Using computer system and minimizing the number of times data has to be manually entered reduces the chance and frequent of human error

Ø Fraud risk, is a risk of loss of earning or capital as a result of internal deception by an employee or client

Fraudulent activities include

· Direct theft of fund by employees

· Creation of misleading financial statement

· Bribes and ghost loans

How to minimize fraud risk

· The use of preventive measures to reduce fraud i.e. employing faithful employees

· The importance of client visit to verify information

8.0 OPERATIONS AND MANAGEMENT SEGMENT

8.1 ORGANIZATION STRUCRURE CHART

8.2 RESPONSIBILITIES OF EACH MEMBER IN THE ORGANIZATION

8.2.1 MANAGER

· Formation and monitoring of groups and individuals

· Supervise the work of microfinance officers in the field

· Survey and selection of new operational area of work

· Approve loan proposals submitted by microfinance officers

· Monitor delinquent

· Conduct regular branch meetings

MANAGER QUALIFICATION

· Bachelor Degree in microfinance and enterprise

· Two years experience in any organization especially microfinance institution or bank under department of finance or loan department

8.2.2 CREDIT OFFICER RESPONSIBILITIES

· Approve loans within specified limits, and prefer loan applications outside those limits to management for approval

· Meet with applicants to obtain information for loan applications and to answer questions about the process

· Analyze the applicants financial status, credit, and property evaluations to determine feasibility of granting loans

· Explain to customers the different types of loans and credit options that are available as well as the terms of those services

· Compute payment schedules

· Negotiate payment arrangements with customers who have delinquent loans

· Petition courts to transfer titles and deeds of collateral to ban

CREDIT OFFICER QUALIFICATION

· Diploma in microfinance management will be enough for this position

8.2.3 ACCOUNTANT

· To records all business transactions as required

· To conduct internal audits to verify any errors or frauds made within the organization

ACCOUNTANT QUALIFICATION

· Diploma in accounts especially cooperative accounting

8.2.4 SECRETARY

· Answer phone calls and redirect them when necessary

· Manage the daily,weekly,monthly agenda and arrange new meetings and appointments

· Prepare and disseminate correspondence memos and forms

· File and update contact information of employees, customers, and external partners

· Develop and maintain filling system Undertake occasional receptionist duties

SECRETARY QUALIFICATION

· Certificate in secretarial course will be enough and also 1-year experience

8.3 BUSINESS EXPENSES

Projecting TMI operational expenses

Category	Expenses amount
Rent	150,000 per month
Phone	30,000 per month
Water and electricity bills	50,000 per month
General office expenses	200,000 per month
Advertisement	500,000 per month
TOTAL	903,000

8.3.1 Projecting TMI Administrative salary

Category	Expenses amount
Manager	800,000
Accountant	550,000
Credit officer	550,000
Secretary	400,000
TOTAL	2,300,000

8.3.2 Projecting capital requirement table for TMI

Funding/Sources of capital	Amount
Owners capital	5,000,000
Donation/grant	5,000,000
Loan from bank	20,000,000
TOTAL CAPITAL	30,000,000

BUSINESS PLAN

BUSINESS PLAN

2.2 Mission statement

6.1.1 PROCEDURES

8.2 RESPONSIBILITIES OF EACH MEMBER IN THE ORGANIZATION

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