Formalization Support Through formalization, NGO MFIs become regulated institutions. It is a complex undertaking, which, when done well, can result in faster growth and outreach, greater product diversification, improved management and governance and increased efficiency.
WWB EXPERTISE
Outcomes
The transformation process can take years and WWB works with network members throughout the process. Since WWB began offering formalization support in 2003 we have worked with nine institutions in eight countries in various phases of the process. In 2008, WWB strengthened its existing formalization capability to include additional service offerings from capital markets advisory to branding and marketing. Approximately one-third of WWB network members are already formalized financial institutions, and an additional third intend to formalize within the next three years, enabling our network members to learn from those who have successfully transformed.
►► Increase growth and client outreach
WWB Approach
►► Increase efficiency and sustainability
WWB assists MFIs in conducting feasibility studies to predict the result of formalization, financially and on the organization’s mission. We also work with institutions to develop a strategy for both the NGO and the resulting financial institution, create a formalization plan and secure regulatory approval, develop the business plan and financial projections, conduct a high-level equity valuation and advise in potential investor selection, outreach and negotiations.
►► Further the commitment to the organization’s mission
Criteria for SUccess Prerequisites • • • • •
A regulatory environment that allows for formalization Board and senior management support for formalization Commitment to preserve the organization’s mission Competitive and operating environment conducive to profitable operations Interest from like-minded potential equity-holders sufficient to meet minimum regulatory capital requirements • A dedicated staff member, consultant or team assigned to manage the implementation of the formalization plan
Commitment • Firm belief by the Board and senior management that becoming a regulated, for-profit financial institution with outside equity ownership is the best way to achieve the organization’s mission • Frequent and open communication within the organization, which is critical to minimize employee and client stress and uncertainty
►► Increase product diversity ►► Improve access to new funds ►► Improve management, transparency and governance
Real Results WWB has assisted MFIs in The Gambia, Kenya, India, Uganda, Bosnia, Russia, Colombia and the Dominican Republic through various aspects of the formalization process, resulting in new commercial organizations with greater client outreach and a continuing commitment to WWB core values.
Thought Leadership ►► WWB Focus Note: Stemming the Tide of Mission Drift: Microfinance Transformations and the Double Bottom Line ►► WWB NGO Strategy Manual