Do you want to create a microfinance company? here is a complete guide to starting a microfinance business with no money and no experience .
Ok, so we have provided you with a detailed example of a microfinance business plan template. We also went further by analyzing and writing a sample microfinance marketing plan backed by actionable guerrilla marketing ideas for microfinance firms. In this article, we will cover all the requirements for starting a microfinance business. So put on your entrepreneur hat and let’s move on.
Why create a microfinance business?
Many investors and entrepreneurs are interested in owning a bank, but they struggle to meet the expected capitalization for a bank, as well as the conditions for obtaining a banking license. If you are really interested in owning a bank but don’t have what it takes to own it, you should focus on setting up a microfinance bank; The capitalization and licensing requirements for a microfinance bank are much lower than for a standard bank.
Starting a microfinance bank can be both difficult and risky, but if you’ve done your due diligence before going into business, you probably won’t face it. loss. First of all, you must have experience in the financial industry. If you really want to get into this business, you will be paid to study accounting, banking, and finance.
It is imperative to analyze existing microfinance banks inside and outside your region. Know how many there are. You will also need to check out existing competitions and find out their strengths and weaknesses. Knowing the weaknesses of the existing microfinance banks around you means that you can learn from their mistakes and, in turn, deliver better and more preferred microfinance banking services without the mistakes and weaknesses of others.
<So if you have done the necessary feasibility and market research studies then you might want to get into this business. If you’ve played around with setting up your own microfinance bank but don’t know how to do it, you should consider this article; he will certainly give you the advice and guidance you need.
Create a microfinance company without money. The Complete Guide
- Industry overview
Microcredit (microcredit or microcredit, as it is also called) are small loans that are issued by individuals and not by banks or other relevant financial institutions. These loans can be made by one person or collected between several people, each of whom contributes a portion of the total. The microcredit business is a business that is part of the microfinance industry.
Microcredit lenders mainly provide loans of at least $ 50,000 to start-ups and other small businesses or individuals. Most often, microloans are given to people in third world countries where traditional financing is not available to help them start a small business.
Microloans receive interest on their loans and principal repayment after receiving the loan. matured. Since the credit status of these borrowers can be quite low and the risk of default is high, microloans exceed average market interest rates, making them attractive to investors.
Statistics show that in 2009, around 74 million men and women had microloans, which amounted to US $ 38 billion. The Grameen Bank reports that the percentage of successful payments ranges from 95 to 98 percent.
Microcredit and microfinance are indeed a thriving and profitable industry, especially in third world countries like Bangladesh (where it comes from), Botswana, South Africa, Kenya, Uganda, ‘India and many other countries.
The microfinance and microfinance sector will continue to thrive as individuals and small and medium-sized enterprises will continue to need microfinance financial services. banks. Although the sector appears oversaturated, there is still enough room to accommodate budding entrepreneurs who wish to open their own microfinance banks.
Among other things, the creation of a microfinance bank requires professionalism and a good understanding of the functioning of the microfinance bank. In addition, you will need to obtain the required certifications and licenses, and meet the standard capitalization for such a business, before you can open a microfinance bank in the United States. The industry is heavily regulated to protect against financial fraud, money laundering and crime.
Creation of a microfinance company without money market study and feasibility studies
- Demography and psychography
The demographic and psychographic makeup of those seeking microfinance banking services encompasses individuals and start-ups who need a structured daily savings plan or access to quick loans, but have no obligation to access these loans from banks and other standard organizations. lending financial institutions.
So if you want to define the demographics of your microfinance bank, you need to include all of that. It should include startups, mom and pop business owners, artisans, budding entrepreneurs, and workers in your area of operation.
List of microfinance industry niche ideas you can specialize in
There are no niche ideas in the microfinance banking sector; Microfinance banks mainly provide loans of $ 50,000 or less to startups and other small businesses or individuals, and also conduct microfinance banking activities such as savings / daily contributions. Some microfinance banks can also operate on the Internet; in other words, people can access their microcredits without physically living in the places where the microfinance bank is located.
The level of competition in the microfinance banking sector
The level of competition in the microfinance banking industry in no way depends on the location of the business, as most microfinance banks and other microcredit businesses can operate online and from anywhere in the world. while still effectively competing in the microcredit sector.
But besides that, there are several types of microcredit. venture capital and microfinance banks are scattered across the United States and across cyberspace. So, if you decide to open your own microfinance bank in the United States, you will certainly face stiff competition not only between microfinance banks and microfinance companies in the United States, but all over the world, especially. if you choose to also surf the Internet. In addition, there are well established microfinance banks and microfinance companies that are setting trends in the industry and you should be prepared to compete with them to get clients.
List of famous brands in the microfinance industry
In all sectors, there are always brands that perform better or are better perceived by customers and the general public than others. Some of these brands are the ones that have been in the industry for a long time and therefore are known for it, while others are mainly known for the way they run their business and the results they have achieved over the years.
These are some of the leading microfinance banks and microfinance companies in the world;
- ASA Bangladesh
- Bandhan (Company and NBFC) India
- Banco do Nordeste Brazil
- Fundación Mundial de la Mujer Bucaramanga Colombia
- FONDEP Micro-Credit Morocco
- Amhara Savings and Loan Institute Ethiopia
- Banco Compartamos, SA, Institute of the International Bank of Mexico
- Al Amana Association for the Promotion of Micro-Enterprises in Morocco
- Fundación Mundo Mujer Popayán Colombia
- Fundación WWB Colombia – Cali Colombia
- Consumer Credit Union “Economic Partnership” Russia
- Fund “People’s Microcredit Bank of Morocco”
- India India Microcredit Fund
- EKI Bosnia and Herzegovina
- Saadhana Microfin India Company
- Jagorani Chakra Bangladesh Foundation
- Grameen Bank Bangladesh
- Opportunity Fund
- Accion New Mexico
- CDC Small Business Finance Corp.
When it comes to starting a microfinance bank, you just need to do a feasibility study and market research right before you start a business. It should be noted that banking microfinance is not for beginners; it is aimed at professionals who have successfully acquired the experience and knowledge to run such a business, but a budding entrepreneur can learn on the job. You just have to be careful not to go wrong.
Starting a business like this certainly means that you are raising a lot of start-up capital (a pool of cash from interested investors). If you are already a rich person, that’s okay. Conversely, if you can’t, you might want to consider getting resources from family and friends. Depending on the scale you want to start at, you may need to soar up to several thousand dollars.
If you do an economic and cost analysis right before you start a business, you may not have a long stay before you reach breakeven point.
Start your Micro Finance Bank business from scratch or buy a franchise
When it comes to starting this type of business, it will pay you to buy a successful microfinance banking franchise rather than starting from scratch. Although it is relatively expensive to purchase a microfinance bank franchise, it will certainly pay off in the long run.
But if you really want to build your own brand after proving your worth in microfinance banking or other related financial service industries, you can simply build your own microfinance bank from scratch.
The truth is that it will ultimately pay you to start a microfinance bank from scratch, starting from scratch you will be able to do extensive market research and feasibility studies before choosing a place to start. a company.
Threats and potential challenges you will face when setting up a microfinance bank
If you decide to start your own microcredit services business today, one of the main challenges you might face is the presence of well-known microfinance banks, microcredit companies, and other financial transactions. lending institutions (banks, mortgage banks, and payday loan service companies, etc.) that offer the same services you intend to offer. The only way to avoid this problem is to create your own market.
Some other threats you are likely to face when a microfinance bank operates in the United States are adverse government policies, the emergence of a competitor. in your place of business and the global economic recession. There is hardly anything you can do about these threats, other than being optimistic that everything will continue to work for you.
Create a microfinance company without legal rights
- The best legal entity to use for a financial business
When you plan to start a microfinance bank, the entity you choose will largely determine the size of your business.
You have the option of choosing a full partnership or a limited liability company, commonly known as an LLC, for a business such as a microfinance bank. Generally, a full partnership should have been the ideal business structure for a small microfinance bank, especially if you are starting out with moderate start-up capital. But people prefer a limited liability company for obvious reasons.
In fact, if you intend to grow your business and have clients, both businesses and individuals, from all over the United States of America and other countries around the world, choose a full partnership. is not an option for you. A limited liability company, LLC will replace it for you.
LLC protects you from personal liability. If something goes wrong with the business, only the money you invest in the limited liability company is at risk. Limited liability companies are simpler and more flexible to manage, and you don’t need a board of directors, shareholder meetings or other management formalities.
Here are some of the factors to consider before choosing a legal entity for your microfinance bank; limitation of personal liability, ease of transfer, acceptance of new owners, investor expectations and of course taxes. You can start this type of business as a Limited Liability Company (LLC) and in the future turn it into a C Company or S Company, especially if you are planning to go public.
Attractive business name ideas suitable for a microfinance bank
As a general rule, when it comes to choosing a name for a business, you need to be creative, as any name you choose for your business will go a long way in creating an idea of what the business stands for.
If you are thinking of starting your own microfinance bank, here are a few catchy names you can choose from;
- Silver Bird Micro Finance Bank, LLC
- Life Line Micro Finance Bank, Inc.
- Trend Vibes Micro Finance Bank, LLC
- Calyx Group Microfinance Bank, Inc.
- Santiago Anglican Municipal Microfinance Bank, LLC
- Fleming Hills Microfinance Banks, LLC
- James Kepston Microfinance Bank, LLC
- Be AX Land Micro Finance Bank, Inc.
- CPC Micro Finance Bank, Inc.
- Jill Gates Microfinance Bank, Inc.
- Shannon Stevens Microfinance Bank, Inc.
- Range Hills Micro Finance Bank, Inc.
In the United States and most countries around the world, you cannot run a business without some of the basic insurance policies required by the industry you want to work in. Hence, it is imperative to budget for insurance policies and possibly consult insurance. a broker to help you choose the most appropriate insurance policies for your microfinance bank.
Here are some of the main types of insurance: insurance policies to consider when buying if you want to open your own microfinance bank in the United States of America;
- general insurance
- risk insurance
- Loan insurance
- Deposit insurance
- Financial reinsurance
- Mortgage loan insurance
- Health insurance
- Liability insurance
- Workers compensation
- General disability insurance
- Group insurance for business owners
- Payment protection insurance
Protection of intellectual property / trademark
If you are planning to start your own microfinance bank, you generally will not need to apply for IP / trademark protection. This is because the nature of the business allows you to run your business successfully without having any reason to challenge anyone in court for illegal use of your business’ intellectual property.
Do i need professional certification to run? Microfinance business?
Professional certification is one of the main reasons why most microfinance banks stand out.If you want to have an impact on the microfinance banking industry, you should strive to obtain all the required certifications in your field of specialization. Certification validates your skills and shows that you are highly qualified, engaged in your career and up to date in a competitive market.
Here are some of the certifications you can aspire to if you want to run your own microfinance bank;
- Microcredit license
- Microfinance banking certificate
Please note that you cannot successfully start a microfinance bank in the United States and most countries around the world without acquiring professional certifications and business licenses, even if you have sufficient industry experience.
List of legal documents you need to create a microfinance bank
Here are some of the basic legal documents you need to have with you if you want to legally operate your own microfinance bank in the United States of America;
- Registration certificate
- Business license and certification / Microfinance finance license
- Business plan
- Non-disclosure agreement
- Employment contract (letters with proposals)
- Operating Agreement for LLC
- Insurance policy
- Contractual consultation documents
- Apostille (for those planning to work outside the United States of America)
- Company charter
- Insurance policy
- Memorandum of Understanding (MoU)
Finance your microfinance bank
In addition to the capitalization and pool of funds needed for the investment, starting with a microfinance bank can be profitable. Securing a standard office in a good business district, outfitting the office, and paying your employees is part of what consumes a significant portion of your startup capital.
There is no doubt that when it comes to business financing, one of the main factors to consider is writing a good business plan. If you have a good, achievable business plan document, you may not have to work hard before the bank, investors, and your friends invest in your business.
Here are some of the options you can explore when looking for seed money for your microfinance bank;
- raise funds from personal savings and sell personal stocks and property
- raise funds from investors and business partners
- Sale of shares to interested investors
- Apply for a loan from your bank
- Transfer your business idea and apply for business grants and seed funding from donor organizations and angel investors
- Source of loans on favorable terms from your family and friends.
Choosing the right location for your microfinance business
Microfinance banks and most financial services based businesses require that you communicate physically with your clients, so this should be in a good location; a place sensitive to human and automobile traffic and a place at the epicenter of the business district if you really want to pay attention to a multitude of customers and maximize your business profit,
First and foremost When choosing a location for your microfinance bank, be sure to do a thorough feasibility study and market research first, and the possibility cannot be ruled out that you come across a similar business that will simply close the store. where you want to open yours. This is why it is very important to gather as many facts and figures as possible before choosing a location to start your own financial bank.
Here are some of the key factors to consider before choosing a shipping destination. and a courier service company;
- Location demographics
- Demand for microfinance banking services there
- Purchasing power and business activities there
- Accessibility and road network at this location
- Number of microfinance banks and microfinance companies in this location
- Local laws and regulations in the community / state
- Traffic, parking and security
Create a microfinance company without technical details on talent
On average, this type of business does not require any special technology or equipment except for dedicated banking microfinance software, social media management applications, and other financial applications.
But you definitely need computers / laptops, internet, telephone, fax machine and office furniture (chairs, tables and shelves). Some of these items can be obtained on a fair basis, especially from organizations that sell or auction their office furniture, computers and equipment.
If you have sufficient capital to run a standard microfinance bank, you should consider renting space for your office.
In terms of the number of employees expected of you to start a business, you will need to consider your finances before making this decision. On average, you will need a CEO or President (you can fill this position), Administrator and Director of Human Resources, COO, Manager risk, operations staff, accountant, marketing / business development manager, loan officers, collection officers and customer service officer.
In addition, you will need a minimum of 10-20 key staff to effectively run a mid-size but standard microfinance bank. If you are just starting out, you may not have the financial capacity or the business structure to retain all the professionals expected to work with you, so you should consider partnering with other financial advisors / experts who work in as freelancers.
Microfinance bank service delivery process
On average, the working methods of microfinance banks are similar, but ideally, the microfinance bank is expected to first and foremost create a reliable business profile before finding working capital. .
Basically, microfinance banks operate like other banks and microfinance companies, they make people invest in them and pay them interest, while lending that money to people who apply for loans and charge interest on those loans.
The difference between microfinance / microcredit banks and banks is that banks set a cap on the amount of interest they can charge, which is stipulated by the usury law. Micro lenders can charge any interest rate they choose due to an exception to the usury law.
It is important to clarify that a microfinance bank can decide to improvise or adopt any process and business structure that will ensure high efficiency and flexibility of return on investment (ROI); the process of providing business services described above is not built in stone.
Create a microfinance company without money. Marketing plan
- Marketing ideas and strategies
As a microfinance bank, you will have to prove your worth over and over again before attracting investors and individuals to provide you with the necessary liquidity / working capital. So, if you are considering starting your own microfinance bank, it will pay you off for a successful career in financial services first.
People and organizations will only put their money in your care if they know they will get a good return on their investment.
So, when developing your marketing plans and strategies for your microfinance bank, make sure you create a compelling personal and business profile. In addition to your qualifications and experience, it is important to be clear in practice what you have been able to achieve in the meantime in the financial services industry and the organizations in which you have worked. This will help you increase your chances in the market when looking for clients / investors.
Please note that in most cases when looking for funds from banks and other financial institutions you will be asked to defend your offer. and so you should be pretty good with the presentations. Here are some of the platforms you can use to market your microfinance bank:
- Introduce your business by sending cover letters along with your brochure to all businesses, households, moms and pop businesses, start-ups, small and medium-sized businesses in where you plan to do your business
- Promote your business in relevant financial magazines, radio stations, and TV channels (provide access to talk shows and interactive sessions related to banking microfinance on TV and radio)
- Register your business in local directories / yellow pages
- Participate in international fairs, seminars and exhibitions on microfinance and financial services
- Create different packages for different categories of clients to meet their financial needs in terms of savings, microcredit and interest rates.
- Leverage on the Internet to promote your business
- Join local chambers of commerce and industry around you to network and market your services; Most likely, you will receive referrals from these networks.
- Use the services of marketers and business developers to conduct direct marketing
Strategies to strengthen the reputation and brand image of microfinance
If you are intending to open a microfinance bank to grow your business outside of the city from which you intend to become a national and international brand, you must be prepared to spend the money on promote and publicize your brand.
When promoting your brand and corporate identity, you should take advantage of opportunities in print, electronic and social (internet) media. In fact, using social media to promote your brand pays off, and it’s pretty effective and widespread.
Below are the platforms you can use to improve your brand and promote and promote your business;
- place advertisements in financial magazines and related newspapers, on radio and television channels.
- encourage the use of word of mouth advertising from your loyal customers
- Leverage on the Internet and social networks like; YouTube, Instagram, Facebook, Twitter, LinkedIn, Snapchat, Badoo, Google+ and other platforms to promote your business.
- Make sure you place your banners and billboards in strategic positions throughout your city
- Distribute leaflets and flyers to targeted areas in and around our region
- Reach out to businesses, households, mom and pop businesses, startups, small and medium businesses in the US and others by calling them and letting them know about your organization and the services you provide
- Promote your business on your official website and use strategies to help drive traffic to your site.
- Mark all official vehicles and ensure that all your employees and management regularly wear your branded shirt or cap.