Business Plan for a Greenfield MFI in Egypt

2019-10-31 - 2020-02-29
Egypt

In Q4 2019, Al Ahly Capital Holding, a private equity firm established by the National Bank of Egypt, decided to explore the launch of a commercially-driven Microfinance Company (“NewCo MFC”), focused on providing financial services to un(der)served segments of the Egyptian population – with a focus on Micro & Small Enterprises and low-income consumers, starting in upper Egypt, but targeting a nationwide geographic expansion – as well as product expansion – in the medium-term. Within the scope of this strategic investment analysis exercise, LFS was contracted to provide support in a number of areas: 1. stocktaking of the identified business concept, 2. preliminary proposal for a product portfolio, enhanced by an initial delivery channel strategy, with a special focus on digital delivery, 3. technology architecture draft – i.e., a roadmap to identify and implement suitable technology solutions for NewCo MFC’s specific needs, 4. 5-year financial model, providing a preliminary financial sustainability assessment of the investment, 5. implementation-oriented Business Plan, consolidating the above activities – to be presented in person by LFS Project Director and Project Manager to relevant AACH stakeholders, during a Final Workshop in Cairo, 6. draft Operationalisation Plan for NewCo MFC, including Terms of Reference, Milestones and a Budget for Technical Assistance by LFS.
Initial mission (Nov – Dec 2019) conducted by LFS in Cairo and Upper Egypt (envisaged launching ground for NewCo MFC): Contact with IT service providers/vendors (in-person meetings, IT conference in Cairo, virtual meetings) Developed initial deliverables (i) Business Model Basics, (ii) Product Features, Risk Indicators and Product Portfolio, (iii) Channel Strategy, and (iv) Recommendations for Systems and Technologies, later used in Financial Model and Business Plan. The remainder of 2019 was devoted to developing the preliminary deliverables shared with AACH on 23rd December: Interim project report, First draft of financial projections, Proposal on NewCo MFC’s Enterprise and Solution structure, including identification of individual IT solutions, a time plan for phase 1 of the realization of the new IT architecture, and a scope of the requirements for the Core Banking System, Overview of different licensing models, and their Capex/Opex impact, for the various IT solutions, High-level concept note for a greenfield Payment Service Provider, as part of the microfinance platform to be launched by AACH. This concept note was developed to meet a request by AACH (not included into the original scope of services) The review of this set of documents was concluded by 30 January 2020. Subsequently, LFS developed a comprehensive draft business plan including the financial projections, and shared these with AACH. During a final mission to Cairo (9 to 14 February 2020) the LFS team (Project Director and Project Manager) conducted a range of workshop meetings with key AACH personnel, finalized the deliverable “Consolidated Business Plan”, and handed it over to AACH on 14 February 2020. As it was originally envisaged that LFS would be a manager/service provider to NewCo during its first years of operations, a final deliverable was the development of a Draft Operationalisation Plan, including Terms of Reference and Budget for the respective services. Since November 2019, AACH progressed in identifying a core team of local managers for the NewCo: as a result, some aspects of this last deliverable (ToR for a management assignment of LFS, budget) became redundant. Hence, the scope of this last deliverable was changed, in agreement with AACH, on the 11th February, to include a high-level draft plan for the future management for preparing NewCo’s operations. (a draft Pre-Operationalisation Plan). The respective deliverable was developed and finalized until 14 February and handed over to the AACH upon conclusion of the mission.