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This is a sample of business plan related to Twaweza Microfinance Limited was incorporated under the companies Ordinance (Cap 212) on February 2013. TM’s mission is to gear the war against poverty through provision of loan services mainly to the working poor as well as small and medium sized entrepreneurs. TM aims at empowering disadvantaged people integrating a commercial approach into a broad human development framework within the United Republic of Tanzania.
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PREPARED BY:
GM Business Development Consult Limited
P.O.BOX 62279 Dar Es Salaam
Tel: +255 715 737302, +255 784 737302
Email: [email protected]
Website: www.gmconsultz.com
PREPARED BY: GM Business Development Consult LimitedP.O.BOX 62279 Dsm -737302Email: Website: www.gmconsultz.com
April, 2014
i
BUSINESS PLAN
PREPARED BY:
GM Business Development Consult Limited
P.O.BOX 62279 Dar Es Salaam
Tel: +255 715 737302, +255 784 737302
Email: [email protected]
Website: www.gmconsultz.com
ii
Table of Content
TABLE OF CONTENT..............................................................................................................................................................III
LIST OF TABLE..........................................................................................................................................................................V
EXECUTIVE SUMMARY..........................................................................................................................................................VI
SECTION ONE.............................................................................................................................................................................1
INTRODUCTION........................................................................................................................................................................1
1.1 BACKGROUND AND THE PURPOSE OF THE INVESTMENT.........................................................................................................11.2 COMPANY’S OBJECTIVES................................................................................................................................................................11.3 COMPANY’S VISION AND MISSION...............................................................................................................................................21.4 SHARE HOLDERS............................................................................................................................................................................. 21.5 CURRENT PROJECTS....................................................................................................................................................................... 21.6 STRATEGIC GOAL FOR 2014-2019............................................................................................................................................21.6 PAST FINANCIAL PERFORMANCE.................................................................................................................................................31.7 LEGAL STATUS................................................................................................................................................................................. 41.8 PURPOSE OF THE DOCUMENT.......................................................................................................................................................4
SECTION TWO............................................................................................................................................................................6
2.1 MICROECONOMIC BACKGROUND..................................................................................................................................................62.2 MARKET............................................................................................................................................................................................62.3 CLIENTS............................................................................................................................................................................................ 7POPULATION.................................................................................................................................................................................................... 7FINANCIAL ACCESS.......................................................................................................................................................................................... 7FINANCIAL LITERACY......................................................................................................................................................................................7SOURCES OF INCOME...................................................................................................................................................................................... 7USE OF CREDIT AND LOAN FACILITIES.........................................................................................................................................................7USE OF SAVINGS FACILITIES.......................................................................................................................................................................... 8
SECTION THREE........................................................................................................................................................................9
3.2 Transport Network:.................................................................................................................................................................. 93.3 Quality Control of Products................................................................................................................................................... 9
3.4 SYSTEM OF RECORD KEEPING......................................................................................................................................................93.6 PRICING STRUCTURE...................................................................................................................................................................103.7 LOAN AMOUNTS AND REPAYMENT CONDITIONS...................................................................................................................103.8 CREDIT RISK................................................................................................................................................................................. 103.10 OPERATIONAL RISK.....................................................................................................................................................................10
SECTION FOUR........................................................................................................................................................................11
MARKETING ASPECTS..........................................................................................................................................................11
4.1 PRODUCT....................................................................................................................................................................................... 114.2 MARKET AND SIZE AND COMPETITION...................................................................................................................................11
4.3 Product Demand and Pricing of Products.................................................................................................................... 114.4 PROMOTION.................................................................................................................................................................................. 124.5 TARGETED CUSTOMERS.............................................................................................................................................................124.6 MARKETING STRATEGY...............................................................................................................................................................12
iii
SECTION FIVE..........................................................................................................................................................................13
FINANCIAL PROJECTIONS...................................................................................................................................................13
5.1 ASSUMPTIONS........................................................................................................................................................................................ 135.2 FINANCING PROPOSAL:...............................................................................................................................................................135.3 PROFIT AND LOSS STATEMENT:................................................................................................................................................135.4 CASH FLOW STATEMENT:.......................................................................................................................................................... 145.5 SENSITIVITY ANALYSIS AND VIABILITY OF THE PROJECT:....................................................................................................145.5 THE BALANCE SHEET:................................................................................................................................................................ 145.6 CONTRIBUTION TO THE PROMOTER.........................................................................................................................................145.7 EMPLOYMENT CREATION............................................................................................................................................................145.8 GOVERNMENT REVENUE.............................................................................................................................................................14
SECTION SIX.............................................................................................................................................................................16
HUMAN RESOURCE PLAN AND MANAGEMENT............................................................................................................16
6.1 MANAGEMENT AND ORGANIZATION.........................................................................................................................................166.2 BOARD AND MANAGEMENT.......................................................................................................................................................166.3 KEY PERSONNEL:.........................................................................................................................................................................176.4 CORE HUMAN RESOURCES ELEMENTS:.....................................................................................................................................176.4 TRAINING AND TECHNICAL ADVICE.........................................................................................................................................186.5 GENDER CONSIDERATIONS.........................................................................................................................................................186.6 HIV/AIDS ACTION PLAN...........................................................................................................................................................18
SECTION EIGHT......................................................................................................................................................................19
CONCLUSION AND RECOMMENDATIONS.......................................................................................................................19
8.1 SWOT ANALYSIS.........................................................................................................................................................................198.1.1 Strengths.................................................................................................................................................................................... 198.1.2 Weakness......................................................................................................................................................................................... 198.1.3 Opportunities............................................................................................................................................................................ 19
8.1.3 THREATS........................................................................................................................................................................................ 208.2 ECONOMIC AND SOCIAL BENEFITS:..........................................................................................................................................208.3 FINANCIAL BENEFITS:.................................................................................................................................................................208.5 CONCLUSION AND RECOMMENDATION:...................................................................................................................................21
iv
List of Table
Table 2: Profit & Loss Statement (TZS).............................................................................................................................3Table 3: Summary of Legal Status of the Company......................................................................................................3Table 4: Estimated Incremental Economic Return......................................................................................................5Table 5: List of Farmers and respective location..........................................................................................................7Table 6: Sources of Raw Material........................................................................................................................................8Table 7: Investment Plan.........................................................................................................................................................9Table 8: Product procurement Cycle...............................................................................................................................10Table 9: Different Product packing sizes.......................................................................................................................11Table 10: Customers Value of sale & country of Destination...............................................................................12Table 11: Annual Sales Trend Monthly 2010/11.......................................................................................................14Table 12: Demand per Customers....................................................................................................................................14Table 13: The Proposed Prices of Products..................................................................................................................15Table 14: Financing Plan(TZS)...........................................................................................................................................16Table15: Sensitivity Analysis Production Investment.............................................................................................16Table 16: Impact and mitigation.......................................................................................................................................21
v
EXECUTIVE SUMMARY
XXXXXX.
vi
SECTION ONE
INTRODUCTION
1.1 Background and the Purpose of the Investment Twaweza Microfinance Limited was incorporated under the companies Ordinance
(Cap 212) on February 2013. TM’s mission is to gear the war against poverty
through provision of loan services mainly to the working poor as well as small and
medium sized entrepreneurs. TM aims at empowering disadvantaged people
integrating a commercial approach into a broad human development framework
within the United Republic of Tanzania.
The Company was founded by Dr. XXX and Mr. XXX who, along with Mr.XX, are
actively managing the company. TML has already started a micro lending pilot
project in Dar-City and has scheduled to roll it out to 200 families in the City
(underserved area in Dar-Es-Salaam city), by the end of 2019, in collaboration with
other stakeholders.
1.2 Company’s ObjectivesTwaweza Microfinance Limited objective is to provide loans to small and medium
enterprises covered within the overall framework and mandate of Twaweza
Microfinance Limited. The specific objectives include;
i. To assist the low income population to build their credit worthiness, and to
finance business expansion, education, and other critical requirements of
livelihood;
ii. To promote equity by enabling the working poor to lift themselves from
poverty through financing their economic activities as they continue to grow;
iii. To promote a credit culture amongst small, and medium entrepreneurs
within Tanzania.
1.3 Company’s Vision and Mission
1
1.4 Share HoldersThe number of share holder is shown in the table below
Name of Shareholder Number of Shares Percentage
Mr. Emmanuel MallyaXX XX%
Mr. Mike Mosha XX XX%
Mr. XXXXX XXX XX%
Detail about the shareholders and issued shares can be seen in the memorandum of
association as attached in attachment one.
1.5 Current Projects
What are the current projects ……
1.6 Strategic Goal for 2014-2019
TML intends to reach out to 7,000 poor families in Tanzania with microloans in the
next five years main focus areas will be Kinondoni area, Mwenge, Ubungo, Tabata,
Kinyerezi, Chanika and Kigamboni. Achieving this goal TML will expand its business
in 2019 to Pwani Region. TML management philosophy is to gain self sufficiency
within five years. For that purpose, the management restricts the fundraising
portion with a declining percentage of 100% in year one down to 55%, in year two,
50% in year three and 30% in year four. In 2019, EEA does not expect to require any
more grants/loan.
1.6 Past Financial Performance
Based on the promoter’s financial records, it was evident in the preparation of this
business plan that the records are well kept which has enabled preparation of
audited financial statements. Summaries of the promoter’s financial statements are
as shown below.
2
Table 1: Profit & Loss Statement (TZS)
Particulars 2011 2012 2013
Gross Income
Gross Profit
Net Profit
Net Profit Margin
Sources: Audited Report 2013
From this performance, the company has been handling substantial amount of money
in revenue. The gross profit margins approximately X% and net profit margins of the
company are very low/high about (X%), which gives the shareholders very little
/good returns.
Table 2. Summarise Balance Sheet (TZS)
DESCRIPTION YEARS
2011 2012 2013
Fixed Assets
Current Assets
Current Liabilities
Net current
Assets
Total Asset
Source: Extracted from the audited accounts
The balance sheet summarized in Table 2 above shows increases in total assets over
years. The increase is a result of accumulated profit, stocks and acquired assets
which has increased both current assets and fixed assets.
3
1.7 Legal status
Twaweza Microfinance Limited is a legal entity and has acquired all legal certificates
and documents needed to operate microfinance business. Some of the legal
requirements fulfilled include:
Table 3: Summary of Legal Status of the Company Company name TWAWEZA MICROFINANCE LIMITED
Company’s Registration Number XXXXX on the XXX February 2013
Place of registration Dar es Salaam, Tanzania
Company Type Private Company Limited By Shares
Business Type Microfinance
VAT & TIN Number 40-XXXX and 111-XXX
Business License ……………….
MICROFIANCE Lisence NO. XXXX
XXXXX If any
1.8 Purpose of the DocumentThe company intends to increase its loan portfolio so as to reach more clients in Dar
es Salaam. Therefore this study is looking at the profitability of the company and
rationally of expanding loan distribution channels and coverage to meet the
customer growing demand. The expansion program is coupled with financial
limitations. These necessitate the company to look for financial leverage from
financial institutions in terms of long term and short finance.
Furthermore, the study analyzed the company financial status, management
structure, security and established projection of customer demand in the next five
years and financial need for the implementation of this project. The final output is a
business plan which looks into the economic and financial viability of undertaking
these investments.
4
SECTION TWO
MACROECONOMIC SITUATION IN TANZANIA
2.1 Microeconomic Background
Despite the high urbanization rate of Dar-Es-Salaam Region (93.9 %) and the narrow to the
capital, the Ilala Kinondoni and Temeke Districts are defined as an urban agriculture sector.
Only a quarter of an entire population is involved in non-agriculture, mainly in the Informal
Sector (95 % – URT, 2008). Typical small scale businesses include: street vendors, shop
sales workers, and crafts men. Majority of people work in petty cash businesses in which
they can buy only the food of the day. Although the poverty rate is only the half of the
country average, Dar es Salaam residents do not have savings for retirement, medical
expenses, life insurance, or plan for sending children to school.
Agriculture activities are based on small and large scale crop farming mostly using poor
hand equipments. GDP per capita for Dar-Es-Salaam estimated to be USD 667 with 35% of
the population earning an average low income of USD 34 per month (URT - Dar-Es-Salaam
City Profile, 2004).
2.2 Market
According to a study of PRIDE (Promotion of Rural Initiative and Development Enterprises),
a major microfinance oriented NGO, ―it is estimated that there are close to twelve million
small and micro entrepreneurs who need financial services, and the number is growing by
4% percent annually, the majority of whom are found in the rural areas (PRIDE, 2011). ‖That is 20% of the country‘s population, mainly dealing in the informal sector.
At the beginning of their microfinance activities, TML is focusing on the urban informal
sector working poor. This sector contributes 43% of the country GDP. Also it contributed
35% to the total urban labor force (URT, 2009). In Dar-Es-Salaam Region, the informal
sector offers about 65% of the city's labor force (URT, 1995). Nearly two of three urban
households own informal enterprises (URT, 2003).
TML decided to boost informal sector by providing financial services to their actors.
Although there are contradicting views regarding the relationship between poverty and the
informal sector, without it, the poverty situation of the affected families would have been
much worse (Orlando, 2001).
5
2.3 Clients
Customer profile is based on survey results explored by Finscope, ―a comprehensive
national survey focused on the financial services needs and usage across the entire
Tanzania population (Finscope, 2007). The TRIODOS Bank highlighted following ‖characteristics of the potential microfinance clients:
2.3.1 Population
57% of the adult population is less than 34 years, and mainly rural-based (72%). In
addition, there are approximately 14 Million people under 16 years.
2.3.2 Financial access
A large segment (40% overall; 45% of urban, 55% of rural) of the adult population has no
access at all to financial services, either formal or informal (overall, 14% have a formal bank
account (11% men, 5% women, 16% urban, 4% rural), 8% have access to semiformal
finance [NGOs, Saving And Credit Co-Operative Societies – SACCOs] and 35% have access to
informal finance like ROSCAs/ASCAs and moneylenders – these categories are mutually
exclusive). Only 20% of the population has access to formal bank in a 1 hour walking
distance.
2.3.3 Financial literacy
This is generally low, and lower still for women and for people living in rural areas (92% of
the population has heard of loans, but 84% do not understand how interest rates work, or
collateral, guarantors, opening an account etc.; 27% have never heard of a savings account).
Beyond loans and savings, financial literacy is close to nil (e.g. on insurance, Automatic
Teller Machines).
2.3.4 Sources of income
Only 4% of the population is employed in the formal sector. Most people make a living from
agriculture, either by selling food crops (36%), cash crops (12%), cattle/livestock produce
(9%), or livestock (11%). Others run an informal small business (28%), not (directly)
related to agriculture. A large majority of people (61%) go without cash income at times.
Many (28%) depend on getting money from family and friends.
6
2.3.5 Use of credit and loan facilities
Of those that borrow, most (38%) turn to family and friends. An additional 33% get loans
from kiosks, 23% borrow in-kind (e.g. livestock). Only 4% have a loan from a bank (5% of
men, 1% of women). SACCOs and MFIs (Microfinance Institutions) serve only a small
percentage of all borrowers (9% and 6% respectively).
2.3.6 Use of savings facilities
Most people with money do not save it with a bank or financial institution. Of those who
save, four out of ten favor saving in-kind (even more so in rural areas) and three out of ten
say they keep money in a secret hiding place (similar for urban and rural). Another
interesting aspect is that of the people with a bank account (9%), many save with or borrow
from informal providers (48%), SACCOs (26%) or MFIs (15%).
7
SECTION THREE
BUSINESS ENVIRONMENT ANALYSIS
3.1 Location of the Investment, TWAWEZA Microfinance Limited is located in XXX Kinondoni district situated XXX km from city centre The promoter investment is very close to customer intended to be supplied with Serengeti Breweries Products. Mwananyamala is at the centre of Kinondoni area, Msasani, Kijitonyama and Mikocheni area.
3.2 Transport Network:Transport communication network in Dar es salaam is good as all roads are passable throughout the year. The promoter’s investment is easily accessible throughout the year which make possible for the targeted customers walk into Twaweza for credit and for repayments. The promoter is strategically located with higher visibility to the intended customers which make it easier to deliver products whenever needed.
3.3 Quality Control of ProductsIn order to ensure high quality products are delivered to esteemed customers, the promoter will employ staff with proven good track record in credit management, customer care and experiences in microfinance. This will minimize customer complaints about delayed credits, loan repayment hence customer retention.
3.4 System of Record Keeping Currently the company has a robust system of keeping record that ensures the repayment and disbursements are done on time. Despite existence of such system the promoter are intending to buy more sophisticated system of record management. The promoters have set aside TZS 3.5 million to acquire the system.
3.5 Investment plan
The promoters plan to add three more truck and a pickup to add to the two existing trucks to assist in delivering small quantities of products to its customers. Currently, the promoter sometimes hires truck to deliver products to customers whenever there is big order to deliver. The plan therefore, will enable the company to procure products from SBL on time and delivery to customers and cut down the cost of hiring trucks and ensure safety of the product. The plan to procure two trucks will cost the company TZS 25million each. See details below
Table 7: Investment Plan (TZS)
Promoters Equity Loan TotalLand Buildings 3,560,000 3,560,000Fixtures and Fittings 6,400,000 6,400,000Motor vehicles 13,200,000 13,200,000Pre - Operational Expenses 3,250,000 3,250,000Total Fixed Investment 26,410,000 - 26,410,000Working Capital 30,000,000 50,000,000 80,000,000Total 56,410,000 50,000,000 106,410,000
Contribution Margin 53.01% 46.99% 100.00%
8
3.6 Pricing StructureTML charges 6% monthly interest using flat balance calculations. TML also charges an upfront application fee of TZS 10,000 on all loans at the time of disbursement. All lending has been transacted in local currency, with no indexing to external values. The management decided to take a lower interest rate than the market average, which would attract more customers at the beginning and is in accordance to the Poverty Reduction Strategy of the Tanzanian government. If the profitability projections turn out to be unacceptable, it will re-price the loan product again.
3.7 Loan Amounts and Repayment ConditionsAt the beginning of 2014, TML will offer a single loan product in Dar-Es Salaam Region. Clients are required to put up a loan guarantee. TML will not offer a grace period on repayments. Contractual loan terms varied between 1 and 3 months, it is projected that in general clients took an extra month to fully repay their loans.
3.8 Credit RiskCredit risk is defined as a potential loss that is indicated when a borrower fails to repay a loan. TML‘s risk prevention and collection strategy depend on the reason for the imminent default: unwillingness or financial distress. Biweekly and monthly collection procedures are part of an early risk recognition system based on ongoing customer evaluation provided by the loan officers. Different approval levels (loan officer – manager –credit supervisor) should ensure a high quality loan application process. A borrower who is in financial distress and is willing to repay their loans will be transferred to a flexible loan. A flexible loan reduces the installment size and extends the maturity depending on the customer payment ability. The company will hire an internal auditor to implement a risk management system following the Basel II requirements.
3.9 Liquidity Risk
Liquidity risk management will be done by the Finance Committee which ensures that funding commitments can be met on time. For that purpose, TML has considered a sufficient liquidity margin in their model.
3.10 Operational RiskOperational risk is a main issue for a start up in finance with their limited resources. Employees who are overloaded, undertrained or underpaid are the primary driving force behind errors, fraud and mismanagement. TML decided to serve and educate their employees from the beginning in a competitive manner. This serves to increase their identification with the company. To ensure proper operational procedures, reasonable controlling systems will be developed from the beginning and will be managed by the Executive Committee. An operational margin is implemented in the model to handle any operational losses and liquidity gap.
9
SECTION FOUR
MARKETING ASPECTS
4.1 Product
Twaweza Microfinance Limited is a purely financial trading company which sells credit to its
targeted groups which are small and medium enterprises that is not served by the banking system.
4.2 Market and size and Competition
The promoter’s main market is Dar es Salaam market specifically Kinondoni areas, Msasani,
Mwananyamala, and Kijitonyama a
The industry has many competitors from within Tanzania and outside. The main driving factor
being time taken to approve microcredit and costs associated to it. However despite the existing
competition the micro credit market is so huge as supported by the following evidence: 54% of the
Tanzanian adult population are financially excluded and do not use either formal or informal
financial products. Only 9% of the population use formal services and 1% use formal other financial
services. 11% of people have a bank account, which breaks down to 16% in urban areas and only
4% in rural areas. The semi-formal sector comprises 3%, made up of 1% using semi-formal MFIs
and 2% using semi-formal SACCOS. 35% of the population use informal products (including friends
and family) and 15% of the population use friends and family as their sole source of financial
access. This shows that there is still substantial number of people who have not been able to access
microcredit through the existing institutions
4.3 Product Demand and Pricing of Products
Market price both products are fairly stable and largely depend on the market forces. Based on the
market trends for the past two years during the preparation of this business plan, Market
assessment has shown that there have been slight seasonal price fluctuations during Government
change of tax in alcohol products.
Table 11: Annual Credit Sales Trend Monthly
10
January
Febru
aryMarc
hApril may
junejuly
augu
st
septem
bet
0ct0ber
november
decem
ber -
10,000 20,000 30,000 40,000 50,000 60,000 70,000
Year 1Year 2Year 3Year 4Year 5
4.4 Promotion
The promoters will make different campaigns to make its products known to wide community. The
main outlet will be through the existing customers and through leaflets and fliers to be prepared
and marketing campaigns to be launched in the 7th month of operations.
4.5 Targeted Customers
The promoters are targeting the working poor, small and medium enterprises that are not served
by the banking system due to many factors. The costs associated with information on the risk and
creditworthiness of the working poor and SME has discouraged banks from landing related clients.
The target group is big as only 23% of the population has access to formal financial sector
4.6 Marketing Strategy
The promoter will set attractive price (interest) compared to his competitors to attract
customers. Furthermore, the promoter will be advertising his products through media, leaflets and
brochures to inform the targeted customers about its existing products and new once to be
introduced at later stages. Also, the promoter will establish a website where potential customers
will be able to access different information including, prices, how and where to apply for credit.
11
SECTION FIVE
FINANCIAL PROJECTIONS
5.1 AssumptionsIn order to prepare financial projection for the promoter some assumptions were made and these
are as follows
TWAWEZA MICROFINANCES LIMITED
NOTES AND ASSUMPTIONS TO THE ANALYSIS
1 Production cycle will be stable and will follow the anticipated trends.
2 The company sells its produce in quantities that do not below TZS200,000 and
not exceeding TZS 3,000,000
3 The company uses the reducing balance method of depreciation at following
rates:
4 Plant and machinery 2.5%
5 Motor vehicles 20.0%
6 Furniture & equipment 12.5%
7 Pre operating Expense 20.0%
9 Interest income is charged on approved credit whereas the bank loan is charged
on outstanding balances.
5.2 Financing Proposal:
The total investment costs amounts to TZS XX million whereby TZSXXX million is equity finance.
The promoter intends to expand its business by adding new equipments, motor vehicles, hiring
bigger ware house and additional working capital. The financing of the proposed new investment is
as shown in table 14 below and detail can be found in the annex 1.
5.3 Profit and Loss Statement:
The income statement shows that in the first year the net profit after Tax is TZS XXX million, in the
second year the net profit is TZS XX million and keep on increasing to accumulate a net profit of
over TZS XXX million in five years, for more details see annex 7.
12
5.4 Cash Flow Statement:
The Net Cash flow depicts a positive balance of TZS XX million in the first year. The accumulated
cash amount to TZS XXXmillion in the fifth year. The project is able to meet its financial obligations
in the next five years, for details see Annex 8.
5.5 Sensitivity Analysis and Viability of the project:
The Net Present Value (NPV) of the project is TZS XXX and Internal Rate of Return (IRR) is XXX% at
discounting rate of XX %. Both measures suggest the project is financially viable and economically
sound.
5.5 The Balance Sheet:
The company Balance Sheet as shown in the Financial Schedules is positive. The net worth of the
company rises from TZS XXX million in year one to TZS XXX million in year five. It will still have
substantial cash balances investments. For Details see Annex 8 and 9
5.6 Contribution to the Promoter
The investment to be undertaken will increase the invested capital to TZS XXX million which is an
increase of approximately XX%. The investment is expected to increase the promoter’s net income
to approximately TZS XX million in the first year and TZS XX million from the fifth year.
5.7 Employment Creation
The business currently provides fulltime employment opportunities to 5 people who receive
approximately a total of TZS. XX million /= annual salary. The expansion of the business will also
increase the number of people employed. This number is expected to increase with the increase in
the volume of business.
5.8 Government Revenue
The government will receive additional revenue in the form of income tax to the tune of
approximately TZS XX million in the first year and TZS XX million in total in the period of five years.
The total incremental gross incremental return is estimated to contribute to the economy to the
tune of TZS XX million with indirect employment of XxXindividuals.
Table 4: Estimated Incremental Economic Return
Direct Incremental Return to Investment ( TZS in million)
13
Investment Return to
debt
Financin
g
Return to investor and
their employees
Value of goods and services
and people employed
Value of
produce and
farm families
benefiting
Governme
nt revenue
Equit
y
Loa
n
Investor No of
employees
per annum
Wages to
employee
Value of
goods and
services
No of
families
employed
Value of
produce
14
SECTION SIX
HUMAN RESOURCE PLAN AND MANAGEMENT
6.1 Management and OrganizationThe basics tasks and strategy of the management and organization of Twaweza Microfinance
Limited would aim at maintaining high quality distribution services that add value to its customers.
Secondly, it is the only strategy through which the management can achieve high sustainable
returns to its investors. The overall strategic objectives can be stated as follows:
Achieving the distribution and revenue targets in the stipulated timeframe.
Maintaining a high profitability through sound financial control over expenditures and
retain a firm and competitive pricing policy for services and products.
Increasing the value added for company’s product and trading them at the recommended
rates.
To contribute to the development of the local economy (where the company shall be
operating), and the national economy generally through the creation of jobs in the
operations of the company and meeting necessary tax obligations to the government.
The Company will implement its strategic plan through a process of Management by Objectives.
Twaweza Microfinance Limited main foundation blocks will be its employees. The company plans
to carry out on - the - job training for most of its staff. In general the company will ensure that
employees get new skills and follow set procedures to increase their productivity throughout. Skills
will need to be developed that will enable the company to react effectively and efficiently to new
demands and market trends.
The overall management team will be under a Board of Directors and the Management Team
headed by a Managing Director. The Organization Chart can be seen under).
6.2 Board and ManagementTML embraces the organizational leadership model with a leadership team capable of formulating
and shaping a coherent vision combined with a management team skilled in implementing and
rejuvenating the vision over time. This team is comprised of an Executive Director working closely
with Governing Board chair, advisors and members committed to constructing and executing the
strategies. The Manager is responsible for the implementation and management of the vision,
15
specifically in the areas of microfinance, social business and entrepreneurial education. The
management of the company is vested in the Governing Board.
6.3 Key Personnel:
Twaweza Microfinance Limited business has hired permanently 23 personnel at the processing
business and has hired XX personnel on short term contracts that would see the achievements of
the set target. The senior technical staff would include.
Managing Director
Manager
Credit Officer
6.4 Core human resources elements:
The following human resources elements would significantly contribute to Twaweza Microfinance
Limited achievements.
Mr. Emmanuel Mallya who is Managing Director with more than 5 years experience in
the field of management. he will provide strategic leadership, oversight, guidance on the
execution of annual business plans. He will be responsible ensure general achievement of
the business operations specifically making sure that annual and monthly targets are
realized. He is also in-charge of soliciting the business capital and enters into legal
agreements with all third parties including financial institutions.
He is possessing msss..........please complete this area
Ms. XXXXXXX- who is a Manager, she has vast experience in the field of finance and
marketing, she will provide general oversight and manage all sales and operations. She will
be the main point of contact to daily company operations including supervision of and
management of all XXXXX
Name all the personel who will be operating the business, their qualification and
experiences
Security guards their roles will be to ensure general safety of goods and products ,Ensure
safety of staff and company resources, Inspect all orders and certify proper authorization,
Report any irregularities of standard operating procedures, Reports to the general manager
16
6.4 Training and Technical Advice
The promoter has personnel with the necessary knowledge and experience in sales and distribution
of products, and the promoter will consult Consulting firms to provide training for the staff
whenever a need arise.
6.5 Gender considerations
The Promoter provides equal opportunities for both men and women when employing the required
labor for the investment.
6.6 HIV/AIDS Action plan
The promoter will make arrangements with district health centres, NGOs and other HIV/AIDS
campaigner to create awareness and prevention for his supporting staffs. Furthermore the
promoter will provide free condoms to its employees as a way to prevent new HIV/AIDS case.
17
SECTION EIGHT
CONCLUSION AND RECOMMENDATIONS
8.1 SWOT Analysis
8.1.1 Strengths
Twaweza Microfinance Limited as a medium company has the potential for rising up to become a
successful and prosperous alcohol Trading company in the near future. The following are
considered to be, the strengths that the company has at its disposal that can be relied upon to make
the company grow and prosper.
Company is close to its customers which reduce logistical problems for the principal client
to access the services. This enable the company to deliver its services to the customers at
the minimum require time.
The company has competitive management which is able to organize its marketing and
distribution to ensure sustainability of the profitability trend.
8.1.2 Weakness
The promoters have not been able to secured enough collateral to enable the company
obtain commercial long term loan from commercial banks. The few security the company
has been used to obtain an overdraft to boost company’s working capital.
The company profitability margin is very low therefore needs some improvement in its
costing strategy. The focus should be to minimize the direct and operation costs a.
8.1.3 Opportunities
In planning what can be done by the company during the next five years, the consultants have taken
into account the opportunities that exist for the company to increase its net worth. The company
may utilize the available opportunities that exist as follows: -
Promoters’ customers are well spread which reduces the risk of trading with few customers
and many customer have created loyalty to the promoter. Therefore, the promoter has the
advantage of using the existing customers to expand its market base.
18
Furthermore there is expanding market of microcredit in Tanzania (as can be seen in the
last two years expansion of sales). This will enable the promoter to optimize profit as it
expands its business.
8.1.3 Threats
The company is facing various threats in the existing operational environment. These include the
following: -
Competition: the presence of other players in the market is a threat the Twaweza
Microfinance Limited as a player in the market. However, with good management and
adequate capital resources required to achieve targeted products distribution, the
company should be able to gradually raise its market share and compete successfully.
Customers may switch to our competitors. The drop out of major customer will have
damaging effects. The promoters will minimize this risk by having competent personnel
who will also be responsible to get customers feedback (complaints).
8.2 Economic and Social Benefits:
The following are some of the indicators that justify Implementation /expansion of the investment
i. The Internal Rate of Return is XX% and The Net Present Value is at XX% Discount Rate is
TZS XXX
ii. Employment creation both for men and women where the investment will directly and
indirectly employ approximately XXX people at its fully capacity.
iii. The government will receive additional revenue in terms of income tax to a tune of TZS
XXXmillion and increase on average government Trading earnings by TZS XXXmillion
annually
8.3 Financial Benefits:
The Ipinda investment would be very profitable as: -
i. The Promoters net profit will increase to a tune of TZS XXmillion annually after the
expansion programme.
ii. The balance sheet would show the net worthy rise from TZS XX million to TZS XXX at year 5.
19
8.5 Conclusion and Recommendation:
Twaweza Microfinance Company meet all the minimum requirement of which include having a
good lending policy, Well established market base, and offices strategically positioned, and
experienced management in microcredit trading business.
TML investment is technically viable, financially profitable and economically sound for
implementation. We therefore recommend the promoter for a term loan of TZS 50,000,000
charged an interest not exceeding 13% annually which will be repaid over a period of two years
.
20
ATTACHMENT
21
Annex 2. Depreciation Cost Initial YEARS Item Value Rate Method 1 2 3 4 5 6
Land & Building
Opening Balance 3,560,000 2.5%Reducing
balance 3,560,000 3,471,000 3,384,225 3,299,619 3,217,129 3,136,701 Allowance 89,000 86,775 84,606 82,490 80,428 78,418 Closing Balance 3,471,000 3,384,225 3,299,619 3,217,129 3,136,701 3,058,283 Furniture/Fittings
Opening Balance 6,400,00012.5
%Reducing
balance 6,400,000 5,600,000 4,900,000 4,287,500 3,751,563 3,282,617 Allowance 800,000 700,000 612,500 535,938 468,945 410,327 Closing Balance 5,600,000 4,900,000 4,287,500 3,751,563 3,282,617 2,872,290 Motor vehicles
Opening Balance13,200,00
020.0
%Reducing
balance13,200,00
0 11,550,00
0 10,106,25
0 8,842,969 7,737,598 6,770,398 Allowance 1,650,000 1,443,750 1,263,281 1,105,371 967,200 846,300
Closing Balance 11,550,00
0 10,106,25
0 8,842,969 7,737,598 6,770,398 5,924,098 Pre operating Expenses
Opening Balance 3,250,00015.0
%Reducing
balance 3,250,000 2,762,500 2,348,125 1,995,906 1,696,520 1,442,042 Allowance 487,500 414,375 352,219 299,386 254,478 216,306 Closing Balance 2,762,500 2,348,125 1,995,906 1,696,520 1,442,042 1,225,736 Total Depreciation 3,026,500 2,644,900 2,312,606 2,023,185 1,771,051 1,551,351
Closing Balance26,410,00
0 23,383,50
0 20,738,60
0 18,425,99
4 16,402,80
9 14,631,75
8 13,080,40
7
22
D. OVERHEADS
1 2 3 4 5 6 7 8 9 10 11 12 TotalSr.N
o Particular
1 Rent 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 2,400,000
2 Electricity 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 600,000
3 Water charges 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 120,000
4 Postage, Fax, and telephones 70,000 70,000 70,000 70,000 70,000 70,000 70,000 70,000 70,000 70,000 70,000 70,000 840,000
5Printings, internet & Stationery 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 1,200,000
6 Fuel 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 2,400,000
8 Bank charges 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 480,000
9 cleaning materials 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 480,000
10 professional expenses 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 250,000 3,000,000
Sub Total:960,00
0960,00
0960,00
0960,00
0960,00
0960,00
0960,00
0960,00
0960,00
0960,00
0960,00
0960,00
011,520,00
0
Sr.No Particular Year-1 Year-2 Year-3 Year-4 Year-5
1 Rent 2,400,000 2,520,000 2,646,000
2,778,300
2,917,215
2 Electricity 600,000 630,000 661,500
694,575
729,304
3 Water charges 120,000 126,000 132,300
138,915
145,861
6 Postage, Fax, and telephones 840,000 882,000 926,100
972,405
1,021,025
8 Printings, internet & Stationery 1,200,000 1,260,000 1,323,000
1,389,150
1,458,608
9 Fuel 2,400,000 2,520,000 2,646,000
2,778,300
2,917,215
23
14 Bank charges 480,000 504,000 529,200
555,660
583,443
15 cleaning materials 480,000 504,000 529,200
555,660
583,443
16 proffessional expenses 3,000,000 3,150,000 3,307,500
3,472,875
3,646,519
Total11,520,00
012,096,00
012,700,80
013,335,84
014,002,63
2
Revenue Projections (green Colour)
Analysis Principal 80,000,000 Annnual Interest Rate 72% Monthly Interest Rate 6.00% Total number of payments 24
Payment No. Beginning Balance
Interest Payment
Total Princial and
Interest
Principal Payment
Ending Balance
1 70,000,000 4,200,000 74,200,000 2,083,333 72,116,6672 72,116,667 4,327,000 76,443,667 2,083,333 74,360,3333 74,360,333 4,461,620 78,821,953 2,083,333 76,738,6204 76,738,620 4,604,317 81,342,937 2,083,333 79,259,6045 79,259,604 4,755,576 84,015,180 2,083,333 81,931,8476 81,931,847 4,915,911 86,847,758 2,083,333 84,764,4247 84,764,424 5,085,865 89,850,290 2,083,333 87,766,9568 87,766,956 5,266,017 93,032,974 2,083,333 90,949,6409 90,949,640 5,456,978 96,406,619 2,083,333 94,323,285
10 94,323,285 5,659,397 99,982,683 2,083,333 97,899,34911 97,899,349 5,873,961 103,773,310 2,083,333 101,689,97712 101,689,977 6,101,399 107,791,376 2,083,333 105,708,042
60,708,042 25,000,000
24
Beginning Balance
Interest Payment
Total Princial and
Interest
Principal Payment
Ending Balance
13 105,708,042 6,342,483 112,050,525 2,083,333 109,967,191
14 109,967,191 6,598,031 116,565,223 2,083,333 114,481,890
15 114,481,890 6,868,913 121,350,803 2,083,333 119,267,470
16 119,267,470 7,156,048 126,423,518 2,083,333 124,340,184
17 124,340,184 7,460,411 131,800,595 2,083,333 129,717,262
18 129,717,262 7,783,036 137,500,298 2,083,333 135,416,965
19 135,416,965 8,125,018 143,541,982 2,083,333 141,458,649
20 141,458,649 8,487,519 149,946,168 2,083,333 147,862,835
21 147,862,835 8,871,770 156,734,605 2,083,333 154,651,271
22 154,651,271 9,279,076 163,930,348 2,083,333 161,847,014
23 161,847,014 9,710,821 171,557,835 2,083,333 169,474,502
24 169,474,502 10,168,470 179,642,972 2,083,333 177,559,639 96,851,597 25,000,000
25
Loan Repayment Schedule
Analysis
Principal 50,000,000
Annual Interest Rate 13%
Monthly Interest Rate 1%
Moratorium (Months)
3 Interest on drawdown Total Loan Principal after Moratorium 50,000,000 Total number of payments 5
Payment No. Beginning Balance
Monthly Payment
Interest Payment
Principal Payment
Ending Balance
1 50,000,000 2,380,952 540,000 1,840,952 48,159,0482 48,159,048 2,380,952 520,118 1,860,835 46,298,2133 46,298,213 2,380,952 500,021 1,880,932 44,417,2814 44,417,281 2,380,952 479,707 1,901,246 42,516,0365 42,516,036 2,380,952 459,173 1,921,779 40,594,2566 40,594,256 2,380,952 438,418 1,942,534 38,651,7227 38,651,722 2,380,952 417,439 1,963,514 36,688,2088 36,688,208 2,380,952 396,233 1,984,720 34,703,4889 34,703,488 2,380,952 374,798 2,006,155 32,697,334
10 32,697,334 2,380,952 353,131 2,027,821 30,669,51311 30,669,513 2,380,952 331,231 2,049,722 28,619,79112 28,619,791 2,380,952 309,094 2,071,859 26,547,932
26
28,571,429 5,119,361 23,452,068
Beginning
BalanceMonthly Payment
Interest Payment
Principal Payment
Ending Balance
13 26,547,932 2,380,952 286,718 2,094,235 24,453,69814 24,453,698 2,380,952 264,100 2,116,852 22,336,84515 22,336,845 2,380,952 241,238 2,139,714 20,197,13116 20,197,131 2,380,952 218,129 2,162,823 18,034,30717 18,034,307 2,380,952 194,771 2,186,182 15,848,12518 15,848,125 2,380,952 171,160 2,209,793 13,638,33319 13,638,333 2,380,952 147,294 2,233,658 11,404,67420 11,404,674 2,380,952 123,170 2,257,782 9,146,89221 9,146,892 2,380,952 98,786 2,282,166 6,864,72722 6,864,727 2,380,952 74,139 2,306,813 4,557,91323 4,557,913 2,380,952 49,225 2,331,727 2,226,18624 2,226,186 2,250,229 24,043 2,226,186 0 28,440,705 1,892,773 26,547,932
27
INCOME & EXPENDITURE STATEMENT
PARTICULARS Year-1 Year-2 Year-3 Year-4 Year-5
INCOME Income 60,708,042 96,851,597 78,779,819 78,779,819 78,779,819 Total Sales 60,708,042 96,851,597 78,779,819 78,779,819 78,779,819 TOTAL REVENUE 60,708,042 96,851,597 78,779,819 78,779,819 78,779,819
EXPENDITURE Overheard costs 11,520,000 12,096,000 12,700,800 13,335,840 14,002,632
Manpower 27,720,000
27,720,000
27,720,000
27,720,000
27,720,000
TOTAL EXPENDITURE 39,240,000 39,816,000 40,420,800 41,055,840 41,722,632 GROSS SURPLUS (YEARLY) 21,468,042 57,035,597 38,359,019 37,723,979 37,057,187 Deprecition 3,026,500 2,644,900 2,312,606 2,023,185 1,771,051 Interest on loan 5,119,361 1,892,773 Profit before Tax 13,322,181 52,497,923 36,046,414 35,700,794 35,286,136 Average Tax (30%) 3,996,654 15,749,377 10,813,924 10,710,238 10,585,841 NET PROFIT (POST TAX DEDUCTIONS) 9,325,527 36,748,546 25,232,490 24,990,556 24,700,295 retained Earnings 9,325,527 46,074,073 71,306,563 96,297,119 120,997,414
28
Profit (%) on Income (Post Tax) 15.36% 37.94% 32.03% 31.72% 31.35% Profit (%) on Expenditure (Post Tax) 23.77% 92.30% 62.42% 60.87% 59.20% Return (%) on Investment (Post Tax) 16.53% 65.15% 44.73% 44.30% 43.79% Return (%) on Equity (Post Tax) 41.82% 59.94% 78.05% 96.17% 114.28% Profit (%) on Income 35.36% 58.89% 48.69% 47.89% 47.04% Profit (%) on Expenditure 54.71% 143.25% 94.90% 91.88% 88.82% Return (%) on Investment 34.16% 49.41% 64.66% 79.90% 95.15% Return (%) on Equity 56.94% 82.35% 107.76% 133.17% 158.58%
Monthly Income Statement
PARTICULARS 1 2 3 4 5 6 7 8 9 10 11 12
CAPACITY UTILIZATION 60% 75% 90% 90% 90%
INCOME
Income4,200,00
04,327,00
04,461,62
04,604,31
74,755,57
64,915,91
15,085,86
55,266,01
75,456,97
85,659,39
75,873,96
16,101,39
9
Total Income4,200,00
04,327,00
04,461,62
04,604,31
74,755,57
64,915,91
15,085,86
55,266,01
75,456,97
85,659,39
75,873,96
16,101,39
9
TOTAL REVENUE4,200,00
04,327,00
04,461,62
04,604,31
74,755,57
64,915,91
15,085,86
55,266,01
75,456,97
85,659,39
75,873,96
16,101,39
9
EXPENDITURE
Overheard costs 960,000 960,000 960,000 960,000 960,000 960,000 960,000 960,000 960,000 960,000 960,000 960,000
Manpower 2310000 2310000 2310000 2310000 2310000 2310000 2310000 2310000 2310000 2310000 2310000 2310000
TOTAL EXPENDITURE3,270,00
03,270,00
03,270,00
03,270,00
03,270,00
03,270,00
03,270,00
03,270,00
03,270,00
03,270,00
03,270,00
03,270,00
0
GROSS SURPLUS (YEARLY) 930,0001,057,00
01,191,62
01,334,31
71,485,57
61,645,91
11,815,86
51,996,01
72,186,97
82,389,39
72,603,96
12,831,39
9
Deprecition 252,208 252,208 252,208 252,208 252,208 252,208 252,208 252,208 252,208 252,208 252,208 252,208
Interest on loan 426,613 426,613 426,613 426,613 426,613 426,613 426,613 426,613 426,613 426,613 426,613 426,613
Profit before Tax 251,178 378,178 512,798 655,495 806,754 967,0891,137,04
41,317,19
61,508,15
71,710,57
51,925,13
92,152,57
7
Average Tax (30%) 75,353 113,453 153,839 196,649 242,026 290,127 341,113 395,159 452,447 513,173 577,542 645,773
29
NET PROFIT (POST TAX DEDUCTIONS) 175,825 264,725 358,959 458,847 564,728 676,962 795,931 922,037
1,055,710
1,197,403
1,347,597
1,506,804
retained Earnings 175,825 440,550 799,508 1,258,35
5 1,823,08
3 2,500,04
6 3,295,97
6 4,218,01
3 5,273,72
3 6,471,12
6 7,818,72
3 9,325,52
7
Yearly Cash Flow 1 2 3 4 5Cash inflows Equity 56,410,000 SELF Loan 50,000,000 Profit before Capital Charges 21,468,042 57,035,597 38,359,019 37,723,979 37,057,187 Total Cash Inflows 127,878,042 57,035,597 38,359,019 37,723,979 37,057,187Cash Outflows Fixed Assets 26,410,000 Initial working capital 80,000,000 Corporate tax 3,996,654 15,749,377 10,813,924 10,710,238 10,585,841 Loan repayment 28,571,429 28,440,705
Total cash outflow 138,978,083
44,190,082
10,813,924
10,710,238
10,585,841
Net cash flow -11,100,041 12,845,514 27,545,095 27,013,741 26,471,347Cumulative cash flow -11,100,041 1,745,473 29,290,569 56,304,310 82,775,656
30
BALANCE SHEET
Annex 9. Balance Sheet Projections
DESCRIPTIONYEARS
1 2 3 4 5CURRENT ASSETS Cash 11,100,041- 1,745,473 29,290,569 56,304,310 82,775,656 Working Capital 80,000,000 80,000,000 80,000,000 80,000,000 80,000,000 Total Current Assets 68,899,959 81,745,473 109,290,569 136,304,310 162,775,656 FIXED ASSETS (NET DEP.) Land and Buildings 3,471,000 3,384,225 3,299,619 3,217,129 3,136,701 Furniture and fittings 5,600,000 4,900,000 4,287,500 3,751,563 3,282,617 Motor vehicles 11,550,000 10,106,250 8,842,969 7,737,598 6,770,398 Pre operating Expenses 2,762,500 2,348,125 1,995,906 1,696,520 1,442,042 Total Fixed Assets 23,383,500 20,738,600 18,425,994 16,402,809 14,631,758 TOTAL ASSETS 92,283,459 102,484,073 127,716,563 152,707,119 177,407,414 REPRESENTED BY: Equity 56,410,000 56,410,000 56,410,000 56,410,000 56,410,000 Retained Earnings 9,325,527 46,074,073 71,306,563 96,297,119 120,997,414 Loan 26,547,932 - TOTAL 92,283,459.21 102,484,073.42 127,716,563.04 152,707,119.08 177,407,414.34
31