Classes are less than a week away and Dr. H has released his strategic plans for many of the Teams this fall. Well, Performance team is here to help and Dr. H’s strategies are easily assisted by our proposals here on our blog.
Loan Team Objectives
1. Hire Honduran Loan Officer
2. Restructure Personal Loan Program
3. Introduce Business Loan Program
4. Link Loan Programs with Opportunity Center Programs
5. Create Standard Operating Procedures for both Loan Programs
Our personal loan program restructures the existing program by reducing waste, making it more difficult to game the system, and making it easier for our institution to benefit our clients (the first priority!) while preventing our clients from taking advantage of us.
Our Economic Activity Loan Program is a new spin on the original Economic Activity Loan program, in that it has reduced values but requires a business plan for business-oriented lending.
The Opportunity center is supplemental to all of these, in that it would help our clients develop businesses and help us raise the standard for what we are looking for in an Economic Activity loan application.
But it doesn’t stop there!
Org Team Objectives
4. Establishment of Governance
A. Establish a Board of Advisors (see BBB Standards for Charity Accountability)
i. Donor Bill of Rights
ii. Code of Ethics
iii. Conflict of Interest
5. Establish an Organization Chart
A. Director of Marketing
B. Director of Operations
C. Director of Finance and Accounts
D. Director of Human Resources
We have an easily accessible proposal for organization governace that can be modified to include additional elements Dr. H has requested (Found HERE.)
So a big thanks to Dr. H for taking our previous discussions over this summer to heart, and championing our causes. We’re looking forward to hitting the ground running!
Personal Loan Program
“Lowering the max loan amount is an excellent idea. As we continue to expand upward in loan amounts we are moving away from the poorest of the poor in the society, which is our original goal as a microfinance organization. I agree that there needs to be some type of penalty for not paying back the loan since we are not giving out loans to a group of women but to individuals, which takes away a type moral punishment or peer pressure.”
Thanks! I agree with you on all counts. Additionally, the penalty structure (unlike structures with collateral or group loan pressure) is not punitive. We make a point of not forcibly reducing the wealth or prosperity of any of our clients, no matter what. This is the hallmark of our institution which we hoped to preserve through all our proposals.
Fast Track Program
“So I’m going to take a realistic approach to this proposal. I see why Dr. H would want such programs, but I fear that it will take us down the road that we are currently on causing us to face similar sustainability problems. Would the people evaluating the applications really be able to determine whether a client is truly, as you say, “stellar” from the information provided? As we have become aware of, there are other organizations around Villa that give out such large loans. If a client truly wants to obtain a large business loan, there are other avenues besides La Ceiba. It is a big jump from a 1000L loan to a 2500L loan (a low to a high risk loan).”
The innovation here is in the Economic Activity Loans. The standard to enter the Economic Activity Loans is very high, because we do not want to encourage starting businesses before people are financially ready, or before they have the know-how. That is why we strongly encourage attendance of BPC courses and again, set the bar high. I think what you fear is that this will become a loophole and ALL clients will be shunted off of the personal loans and end up in Economic Activity. This is not what we want, we tried to design a system where very few would be eligible for the fast track. We welcome any and all ideas on how to best accomplish this and prevent the high risk of larger loans becoming a negative aspect of our institution.
Economic Activity Loan Program
“So from what I can gather from your excel doc (loan-repayment-by-amount.xlsx), the highest loan we have given out is 4500L (there was only one that was paid back). Since this excel doc doesn’t give information about outstanding loans I am unaware of any higher loans. There is a total of 89 loans on this document and only one is higher than 4000L. There are 62 below or equal to 2500L, and there are 26 between 2500L and 4000L. So the majority of loans that have been repaid were ones in the lowest category, thus they have the lowest risk. This should therefore be our focal point. Before I go on with my anaylsis of this information, I need to know where the outstanding loans lie on this spreadsheet. I like that you decreased the amount of money that we are giving out, but it is still a big jump from 2500L to 4000L. There is definitely higher risks involved, but if we as an organization are willing to take those risks on clients who have proven they can repay their
loans, then I am okay with it.”
The Spreadhseet you were looking at is a cleaned analysis. Many outliers have been removed. The highest loan we have given out I believe is between 10,000-20,000L, there are at LEAST two in this range. The difference between the historical data you are looking at and what we have proposed is, again, the qualifications. As explained in the Fast Track section, the bar is set high so there will be very few clients here. Additionally, the segments are not “2500 TO 4000” but “2500 to UP TO 4000”. Since presumably our EAL clients would be operating sustainable business, they would be allowed to select a loan in the parameters that suit their needs and on a longer schedule to help smooth business operations. I will try to get a detailed distribution of loans and whether they are paid or outstanding to you, but I cannot guarantee how soon.
Reorganization Proposal and Business Plan
“As a member of the impact team last year, we stressed the idea of setting up theory of change, which is similar to your “business plan.” That being said, creating a business plan will enable us to see if we are progressing towards our short-term goals, which will help us evaluate if we are actually heading towards our long-term goals. We had many discussions last year about the wording of the mission statement, and the consensus was to leave it vague. I would prefer to have a more concrete mission statement, but I think this will be met with some resistance.
As far as the reorganization of La Ceiba, I’m not convinced that this is the correct approach to take. We definitely need to discuss this in person before anything officially is changed. Personally, I’m against it, but I need more information on it and I am willing to listen to your reasons for organizing La Ceiba in this fashion.”
A Business plan is essential to operating a business in an organized manner. Right now, we have no real idea where we are going. If I were to ask you where La Ceiba will be or hopes to be in 3 years, you probably could only tell me your opinion, and not something that the organization could agree on as a whole. A Business Plan solves this and gives guidance over a long period of time, solving some of the problems La Ceiba has with turnover of students.
The Rationale behind the proposed structure is growth. We want La Ceiba to grow, and to be able to accommodate growth. I do not believe la Ceiba can handle more than 20 or so people. What if 50 people wanted to join La Ceiba, how would we keep them organized? The structure allows for growth, and it guarantees that everyones ideas can be heard via their “Delegate”. With respect to the business plan, it also makes it significantly easier to achieve goals because decisions would not have to be discussed as an organization but could be executed as a team.
Thanks you for your feedback! Please feel free to email or leave a comment below or leave more feedback, we take all your comments to heart and are looking forward to getting a broader discussion going!
Welcome! To help guide you through the multiple and various proposals we’ve placed on this blog, use this post as a guide. Please note: I know you will want to write comments as you read them, but save ‘em and submit via FEEDBACK please!
- For our guiding principles, click HERE.
These will help give some background on Performance Team, who we are, and what we are trying to accomplish. Our Mission and Values are constructed for INTERNAL USES ONLY, so all our proposals can be related to this as they pertain to changes within La Ceiba.
The links below provide background into why we realized that something within La Ceiba needs to change. The basic data revealed some interesting figures, the most striking of which is the disparity between Principal Expenditures and Gross Receipts from our loan program. This prompted a more detailed look at our financial situation, a thorough discussion of which is located on the second link. The Sustainability study shows what happens to a hypothetical dollar La Ceiba spends. It puts in easy to understand terms how unsustainable we are.
- For some basic Data regarding La Ceiba, click HERE
- For a detailed Financial Analysis, Click HERE.
- For a basic Sustainability Study, Click HERE
The link below is a statistical model based on current repayment rates. It shows the probability that a given scenario will create a profit for La Ceiba, given current rates. Feel free to play with it and see for yourself that our current repayment rates are unacceptable, and also very unlikely to be profitable.
- For additional information regarding the state and sustainability of our current loan program, Click HERE.
Regarding interest rate, we decided to be cautious and see, using the formula we’ve used before, what our interest rate would have to be if we wanted to make La Ceiba profitable. The results were shocking, and solidified in our minds that something structural needed to change if we wanted to make a measurable, long term impact on our clients.
- For a discussion regarding just changing the interest rate to make us sustainable, click HERE.
Another study (linked below) that repayment begins to drop at loan levels greater than 2000L. We decided, after a presentation to Hugh and Dr. H, that capping the Personal Loan program at 2000L was a good place to start.
- For a study on where problems with repayment begin, and thus where we began looking to change our loan program, Click HERE
The links below will guide you through our proposed changes to our loan program. These are small changes that can make a big difference, most notably reducing our loan scale increment to 250L from 500L, and requiring repetitions of Loans before being eligible for the next on the ladder. Our proposal is more detailed, please click the above link for more thorough explanations.
- For a List of our Loan Program Proposals, Click HERE
- For Details on the basic changes, click HERE
- For Details on the Fast Track Loans, click HERE
- For Details on Economic Activity Loans, click HERE
- For Details on Catastrophic Loan, click HERE.
A study performed testing the value of Repetitions (linked below) sends a hypothetical batch of 100 clients through our proposed new loan program, and our current loan program. It shows pretty conclusively that we cannot be profitable if we do not have loan repetitions, and even then repayment rates need to be kept high. It shows the more repetitions of loans, the larger our profit margin and therefore the larger the cushion for unusual circumstances, or the greater amount we can re-invest in our clients.
- For a study showing evidence in favor of Repetitions, Click HERE
With all the changes we’ve proposed, we realized we need to have an internal structure that suits the amount of growth we hope to experience. The current model is chaotic, and so the structural proposal clarifies team roles and presents a hierarchy suitable to our organization. The Business Plan and Mission Statements help to reinforce the structural backbone of La Ceiba, providing infrastructural guidance as we move forward with these endeavors.
- For a proposal on re-structuring La Ceiba to facilitate Growth, click HERE
- For a Discussion on formalizing our business plan, click HERE
- For a discussion on reformulating our mission statements, click HERE.
Feel free to explore around and leave comments where you like. But most especially, please leave Feedback [<- Click!] and we can address any specific comments and concerns in a blog post, rather than a chain of comments.
This is an open forum and we take all criticism to heart. These proposals have been simmering all summer, we pitched many of these ideas to Dr. H and Hugh in a conference call, then decided that they were ready to be proposed to La Ceiba as a whole. We want this to be an open forum for all discussions that wouldn’t “fit” on the traditional La Ceiba homepage. Look forward to hearing from you!
Introducing the Performance Team Finance Blog! Our Goal: to keep the rest of La Ceiba informed as to what is going on behind the scenes, what ideas we have, and to provide a central location for discussion of the financial state of our MFI.
Feel free to comment, ask questions, make requests, etc etc etc.