Productivity Improvement

Our Approach

PPP offers execution of Long Term Institutional Strengthening Projects like including reengineering, focusing on specific areas like decentralization, lending efficiency, product development, market research, training, capacity utilization and cost and risk management analysis.

Global crisis (2009) has put into the light the weaknesses and shortages of MFIs in order to face the lack of funding, exigency of the market and investors of greater productivity and efficiency, increasing competition and risks.

MFIs are not used to crisis mode. Many CEOs were perfect for growth and vision but now funds face new situation and don’t have the infrastructure to support an MFI in trouble. New easy solutions could be bottom fishing or immature copies of textbook cases. As Public perception on Microfinance and experts established: “King is naked”.

While this Crisis is harder than most before, You can only win if you act NOW!

We Suggest to:

Pushing Back:

  • Reducing costs
  • Improving Risk management
  •  Find convenient funding resources
  • Business combinations
  • Educate staff (at each level)

Set up of Project

PHASE 1: Improving Processes, identify, analyze and reduce Expenses
Aiming for Perfection…areas of reengineering:

  • Item Related Improvements: ¿Are we using the right tools?
  • Process related Improvements: ¿Are steps designed to optimize the available capacity?
  • Complete Restructuring of Workflow: A process might be redundant in general or can be centralized  

PPP has developed a tool for carrying out a complete process mapping per product and branch. Gathering qualitative and quantitative information with the interview activities, we can identify inefficiencies, operational risks, bottle –necks, product design and client’s attention problems, human resources necessities, etc.

PHASE 2: Educate, training staff, board and managers

  • Educate MFI employees about Crisis Situation, in case reductions are planned,
  • Educate Customers. The goal must be that customers talk about financial problems before they arise
  • Communicate to Regulators (through industry organizations) about ways to support the sector
  • Talk to other MFIs about their issues.
  • Educate investors about the true situation in your sector.
  • The true nature of Social Responsibility can be tested in this crisis

PPP offers a modular training program according to the necessities and capacity of each MFI. Distinguished international experts work with us. A precise benchmarking is carried out in order to compare MFI results among their peers.

PHASE 3: Business Combinations

  • Increased interest in Mergers and Consolidation
  • Remember key strengths of MFIs, Review other bank’s mergers and their success rate
  • The strength of an MFI is the proximity to its clients
  • Main areas for improvements and rationalization is “behind the scene” in areas like MIS, IT, Back Office
  • Beware of quick solutions – fully understand the motivation of new Equity Funds

PPP assist MFIs reporting institutional diagnosis and opportunities to improve current situation, reviewing the strategic plan, policies and resources (HHRR, MIS, Governance) for board and investors.

PHASE 4: Centralization/Decentralization projects
MFIs in their growing process face one of the most important question: ¿When it is appropriate to make the decision to decentralize? Many MFIs make the decision after analyzing the benefits and costs of the process.

In general, it is advised to decentralize when the motivation and creativity of many people is critical. This principle can become critical when MFI is dealing with a rapid growth.

  • Decentralization has four general benefits: 1) it encourage flexibility, creativity and innovation; 2) with knowledge sharing it allows many minds to work simultaneously on the same problem; 3) it promotes individualization and accountability for responsibilities and decision-making, and 4) it facilitates client satisfaction and orientation as the decision-makers are closer to clients.
  • Quality assurance and risk management require centralize decision-making. In order to prevent the organization against hard-to-predict losses due to credit risk and control information asymmetries for example.
  • For some process centralized functions take advantage of economies of scale. When high fixed costs forbid the decentralization of a particular function to a branch level, and when the cost of a process is higher after it is performed in more than one location.

PPP help financial institution to answer the question: How to determine which functions to decentralize?. PPP can work together with MFI in order to: Identify the functions decided to decentralize; Define scale, risk and cost (low, mid, high); Detail the tasks per decentralized function that Branch Managers and Loan Offices have to perform at branch level; Identify the person responsible in HQ of controlling the work quality.

As one important characteristic of any decentralization process is its gradualism, PPP offers design a tailored plan for MFI according its necessities, internal capacities and base in our experience and previous benchmarking with peers we suggest tasks, responsible and potential coaching assistance.

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Productivity Project

  • Productivity is common known as an overall measure of the ability to produce a good or service. More specifically, productivity is the measure of how specified resources are managed to accomplish timely objectives as stated in terms of quantity and quality.
  • Productivity may also be defined as an index that measures output (goods and services) relative to the input (labor, materials, energy, etc., used to produce the output). In finance, the two primary inputs are human resources and financial resources which are used to achieve specific outputs, such as portfolio amount, number of clients and credits and income.
  • Productivity in microfinance is measured using ratios of performance, outputs (numerator) per input (denominator: staff or loan officers).     

To What Extend Decentralize?

  • Sometimes people think – wrongly – that decentralization means automatically pushing all decisions lower in the organization, whether or not the people at the bottom have the skills to make the decisions wisely.
  • Besides, some decisions often need to be centralize, especially those who needs experience, special skills and knowledge to make the right choice. However, even in such cases a business may benefit from developing good decision-making capabilities in more people.     

Case: FONKOZE MFI

  • Fonkoze is a bank the poor can call their own: Haiti’s Alternative Bank for the Organized Poor. It is the largest microfinance institution in Haiti and offers a full range of financial and educational services to the Country’s poor, primarily outside of the urban centre
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Productivity Improvement Clients