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

Proving compliance

Potential funders may ask you for copies of the following contracts and certificates:

  • certificate of incorporation
  • proof of registration with your regulatory body
  • shareholder agreements
  • outstanding loan agreements
  • audited financial statements
  • auditor’s reports

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?

Ready to take advantage of new opportunities and grow your business?

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