THE BRIDGE FOUNDATION

Evolution of a Dream
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Micro Finance Support Services

Up-gradation of FI’s including establishment of new MFI’s:

The Bridge foundation in its endeavor to assist the poor and marginalized through Micro Enterprise Development, has so far associated with over 450 MFI’s, most of them from their establishment stage itself. In the process TBF has acquired expertise in setting up of MFI’s of different legal structure ie. Non Banking Finance Companies, Trusts, Societies etc.

In the past, institution building was focused on the creation or expansion of institutions and the technical skills needed to operate them. It is now accepted that reforms must deal not only with institutions but also with the individuals who work in them. There is a need for results-oriented leadership that promotes and applies integrity, accountability, transparency, as well as a general acceptance of the mind-set, beliefs and customs.

Organizational Development:

The key task of Organizational development strategy is formulation, environmental analysis and identifying opportunities. The five tier strategy is, at zero level organization’s objectives and resources and a plan for meeting them. At level-one the competency of rivals and to look at how they impact the business environment. At level two, to build on information about the markets in which it operates. At level three, review of transactors such as clients, competitors and collaborators who either add value or can harm, on organization’s ability to deliver results. TBF play a key role in completing the strategy-building activity to impact the overall ability of the organisation to deliver results.

Micro Finance Regulatory framework development:

Identifying key issues on how the overall regulatory framework affects integration of microfinance institutions into the financial system in respect of both regulated and unregulated institutions in a financial structure to facilitate financial deepening and outreach to otherwise underserved groups in urban and rural areas. That environment promotes sustainable microfinance and encourages regulatory authorities to develop appropriate prudential regulations and staff capacity. They address an important issue that has received scant attention, measuring and paying for the costs of regulating microfinance, and the need to build technical capacity of supervisory and regulatory staff.

Business planning & Strategy:

The approach to micro-enterprise development is based on the needs of the market combined with the sequenced delivery of different components - community mobilization, entrepreneurship development, skill training, micro-credit, appropriate technology and marketing linkages. Entrepreneurship development, technology and business counseling were often not integrated. The net result was often ineffective and expensive. A business plan contains a market analysis and details of strategic marketing, management structure, personnel and finance. When properly conceived, it acts as a valuable tool to make a complex analysis of the whole business.

Development of Credit Policies & Procedures:

Success of any financial institution is mainly dependent on its Credit Policies & Procedures. Overuse of subsidized loans can lead to distortions. Grants may end up in the hands of individuals who do not have profitable investment opportunities. Consequently, they may waste the money on unprofitable projects or simply divert funds for consumption purposes. In subsidized credit programs, loans are often diverted to better-off households. Such diversion of funds may result in borrowers not to repay a loan even if they are able to do so.

Product Development and Marketing strategy:

The main consideration in developing Loan Products for Micro finance is financial self-sustainability. The design of micro-finance products, for example. interest rates, repayment schedules, application procedures, loan size and purpose and savings conditions are often decided on the above consideration. Very little attention has been given to gender equity or empowerment questions. However, women's ability to use micro-finance to increase incomes and control these incomes are affected by design of micro-finance products: types of collateral requirements, modes of disbursal, loan size and timing, types of savings product and so on.

Micro Credit delivery mechanism:

Microfinance clients desperately need microfinance plus services along with timely credit assistance. If the staff can provide multiple services, distribution channel is more efficient because the fixed costs would remain constant and customer satisfaction is higher. Over a decade exponential growth, MFIs are still struggling to manage credit operations and expand outreach, portfolio and profitability. If the sector can efficiently manage microfinance plus services, this would help the clients, but also ensure better business prospects for the MFIs in the long term.
The key component to successful delivery is client participation and ownership. There is a need for MFIs offering a holistic package of microfinance and plus services to fulfill the bigger objectives of MF sector.

Credit Risk management:

Credit risk is most simply defined as the potential that a borrower will fail to meet his obligations in accordance with agreed terms. Major cause of serious problems continues to be directly related to lax credit standards, poor portfolio risk management, or lack of attention to changes in economic or other circumstances that can lead to a deterioration in the credit standing. The goal of credit risk management is to maximise a FI’s risk-adjusted rate of return by maintaining credit risk exposure within acceptable parameters. The sound practices set out will specifically address the following areas: (i) establishing an appropriate credit risk environment; (ii) operating under a sound credit-granting process; (iii) maintaining an appropriate credit administration, measurement and monitoring process; and (iv) ensuring adequate controls over credit risk.

Asset & Liability Management:

Asset-liability management basically refers to the process by which an institution manages its balance sheet in order to allow for alternative interest rate and liquidity scenarios. Financial institutions provide services which expose them to various kinds of risks like credit risk, interest risk, and liquidity risk. Asset liability management is an approach that provides institutions with protection that makes such risk at acceptable level. Asset-liability management models enable institutions to measure and monitor risk, and provide suitable strategies for their management. Asset-liability management includes not only a formalization of this understanding, but also a way to quantify and manage these risks.

Loan Recovery Management:

Loan Recovery management is central to credit management. This process needs to start at the loan initiating stage itself. Effective management of recovery comprises two pronged strategy. First relates to arresting of the defaults and the second is to handling of loan delinquencies. The tenets of recovery management begins with creation of sense of urgency in the minds of staff to look into the asset quality and to give them a message that either they perform or perish. The recovery management strategies are  Preventive and Corrective. While preventive methods are aimed at preventing the event of a default within the prescribed procedures, the corrective methods are aimed at ensuring recoveries once credit is due for payment. Strategy is proper motivation and commitment of the staff, strict adherence to proper loan supervision and monitoring and a congenial relationship with clients contribute.

Development & Implementation of MIS Management Information Systems:

(MIS) is the term given to the discipline focused on the integration of computer systems with the aims and objectives on an organization. While computers cannot create business strategies by themselves they can assist management in understanding the effects of their strategies, and help enable effective decision-making. The development and management of information technology tools assist executives and the general workforce in performing any tasks related to the processing of information. MIS systems can be used to transform data into information useful for decision making. Computers can provide financial statements and performance reports to assist in the planning, monitoring and implementation of strategy. By studying these reports decision-makers can identify patterns and trends that would have remained unseen if the raw data were consulted manually.

TBF in collaboration with a software company OTCO International successfully developed and implemented MIS for many MFI’s.

Human Resource Policy & Management (HRM):

HRM function has undergone tremendous change over the past years. Earlier "Personnel Department," mostly used to manage hiring and paying. Presently "HR Department" as playing a major role in staffing, training and helping to manage people so that people and the organization are performing at maximum capability in a highly fulfilling manner. The HRM function includes identifying what staffing needs an organization has and recruiting high performers, training, dealing with performance issues, and ensuring personnel and management practices confirming to various regulations. Also managing approach to employee benefits and compensation, employee records and personnel policies.

Training and Development:

Learning is enhancing one's knowledge, understanding or skills ie., enhancing one's capacity to perform. The skills are applied to the most appropriate tasks and practices in the organization, thereby producing performance -- results needed by the organization.

Training is an expert and learner work together to effectively transfer information from the expert to the learner to enhance a learner's knowledge, attitudes or skills, to enable the learner to perform job better. Development is ongoing multi-faceted set of activities to bring the personnel up to another threshold of performance e.g., orienting about a role, training in a wide variety of areas, training on the job, coaching etc.