Accessing capital: a key challenge for financial institutions
As a financial institution in a frontier market, your business connects individuals in your community to the financial services they need to build a brighter future and protect them from risk.
Yet—like many financial institutions—you may lack access to the capital that your business needs to grow and serve more individuals.
It’s possible to access the funds you need to expand your reach into new territories or to grow your loan portfolio through a relationship with a microfinance investment vehicle (MIV), such as a development finance institution or an international creditor. Many MIVs are interested in making debt, or even equity investments in businesses like yours.
How to improve your access to funding
There is a great deal of competition for a limited pool of available capital, and the process of applying for funding from an MIV can be complex. It’s important to understand which legal, technical, financial, social and operational aspects of your business a funder will evaluate when it considers providing capital for your growth.
Providing accurate financial statements
To be considered as an attractive investment, your financial institution should show solid historical performance and potential for growth. Your financial statements should show that:
your financial institution has capacity to take on more debt
your cash flow covers your liabilities
your business trends toward profitability
you use your assets efficiently
you are managing your risks
Showing efficient processes
Funders gravitate toward financial institutions that have robust business processes and systems in place. Funders may be interested in the following:
your processes for reporting and monitoring your portfolio
how you are managing risks from fraud and human error
your process for making informed decisions
how you ensure business continuity
Potential funders may ask you for copies of the following contracts and certificates:
certificate of incorporation
proof of registration with your regulatory body
outstanding loan agreements
audited financial statements
Tracking your social impact
Funders and investors are usually interested in your financial institution’s purpose, culture, business model and operations. Before you seek funding, you should capture key corporate information including:
how you are making progress toward your mission
your institution’s history and key milestones
statistics about your clients
your plans for growth
your team and your organisation’s culture
Interested in downloading Oradian’s roadmap to funding for financial institutions?