Microfinance Management and Investment Advisory

M2i Founders Chase A Dream; Set Up Firm To Offer Advisory Services To Microfinance Companies.

M2i consulting has been set up to catalyze the growth of microfinance by bringing in more professionalism in the sector. Towards this mission, they endeavor to work with start-up as well-established MFIs, entrepreneurs, investors and donors and provide such services which facilitate integration of microfinance with the economic mainstream.

They bring in best application of modern management principles to microfinance, by continuously assimilating knowledge from diverse fields and by building on the body of knowledge within the microfinance domain. They use rigorous analysis to solve complex management problems, while maintaining absolute clarity in the recommendations they make. Their processes are designed to ensure an intellectually rewarding experience for their clients, as well as, for us.They interact closely with their clients to provide customized solutions. While they emphasize on innovations, they follow them up with rigorous validation and standardization to ensure sustainability of these innovations.

Imagine building a business plan by combining a love for travel, desire to see development in villages, financial acumen and college friendships. That’s what three students at the Institute of Rural Management, Anand (IRMA) did in 2001. Deepak Alok, B Atul and Rajeev Kumar used to discuss how market forces could aid development. One compelling area to look at was the fledgling industry of microfinance, banking for the marginal sections of the society. It was not yet mature, but had all the ingredients of any mainstream industry, they believed.

DEEPAK ALOK CO-FOUNDER, M2I CONSULTING

Microfinance Management and Investment (M2i) Consulting came into being in March 2006and quickly landed a client in ESAF, Thrissur. The start-up advised ESAF on capital structure and conducted training. The success of the first assignment was noted and ICICI Bank soon signed up as a customer.

The company got its first international assignment from Microfinance Investment and Support Facility for Afghanistan (MISFA). M2i assessed the financials of an MFI called Parwaz, which later became its client. More projects came from southeast A s i a n countries and the team had to travel to places like Indonesia, P h i l i p - pines and Cambodia.

Today, M2i’s client list includes Rashtriya Grameen Vikas Nidhi (RGVN), Sadhan, Development Alternatives, ESAF, Cashpor, BISWA, Nirmaan Bharati and Appropriate Technology India (ATI). M2i trains, provides support and management consultancy to MFIs. It also helps these institutions in designing products for their clients — the villagers who borrow money from these MFIs.

Microfinance institutions often find raising capital a difficult proposition, given that the rural banking mechanism is unfamiliar to most investors, including private equity and venture capital firms. Making money in microfinance is itself a challenge and providing corporate advisory services could have been even more so, but M2i navigated through the early difficulty of winning clients by leveraging the prior contacts the partners had. “Initially, we were apprehensive, we weren’t sure how it will work. But, we had the confidence that it was all that we wanted to do,” Mr Bist says.

RAHUL BIST CO-FOUNDER, M2I CONSULTING

The company, which now employs 11, has made profits from the first year of operation in 2006-07. It had a revenue of about Rs 15 lakh in the first year and Rs 40 lakh in the nine months of the current fiscal. It has a profit margin of 10%.

Entrepreneurship makes you an all-rounder, feels Mr Alok. Initially, he had to do everything from writing the books of accounts to ensuring numerous regulatory compliances and most of his time was spent on them. “But, it’s only when you go through this experience that you realise how very discouraging complex regulatory requirements can be for a start-up. Thankfully we now have fairly standardised and streamlined systems.”

Article Resource:
The article appeared in The Economic Times, Mumbai in one of their successful columns on Entrepreneurship/Start-ups called "Starship Enterprise".

M2i Consulting

Micro Financing

Financing Micro Dreams

MICROFINANCE is on the lips of every banker in India today. Private equity and venture capital investor have also taken a fancy for this growing sector that seeks to tap the credit and other financial needs of the country’s poor and unserved populations. This has given a rare opportunity to entrepreneurs to bring together social work and capital-led business professionalism. Intellectual Capital Advisory, or Intellecap as it better known, is a five-year-old firm that taps this niche, helping microfinance institutions (MFI) and similar groups scale up and make the investment grade.

Active since 2004, Intellecap has worked with around 30 organisations, assisting them with their business plans, helping them structure innovative debt instruments and also facilitating private equity investments. It acted as advisor to Legatum in the $25 million investment into ShareFin, one of the largest investments in an MFI in India.

“It’s not hard to figure why so many funds are flocking to MFIs. There are 8 crore families below the poverty line and even if each family takes a Rs 5,000 loan, it is a huge market,” says Vineet Rai, co-founder. Rai started the venture with his wife, Swati Rai, and two other friends, Pawan Mehra and Upendra Bhatt.

Rai and Mehra met at IIM-A where Pawan was a student. Rai was the CEO of Gyan, an incubation fund for rural innovation set up by IIMA and the Gujarat government. The two of them, along with Bhatt, a friend of Pawan’s, put together their savings and started the institution.

It is hard to pinpoint Intellecap’s precise line of business because like the firms it advises, it was not set up with the motive for huge profits. It was set up to bridge the gap between the entrepreneurs and investors, provide consultancy services and support to for-profit social enterprises along the lines of what their mainstream corporate counterparts could access, and knowledge advisory in the form of an MFI gateway it manages for the World Bank. The nature of the companies it advises also makes it difficult for Intellecap to earn substantial revenues from a single client or transaction, unless it has a diverse revenue mix.

In 2004, nearly all its revenues came from knowledge advisory and the MFI portal it built and still manages. In 2005, however, revenues from consulting services also kicked in and it was its largest business. In the last two years, in addition to these revenue streams it also got revenues from helping MFIs structure innovative debt instruments and advising on investment transactions such as the Legatum-Sharefin deal.

Social investment banking is a growing business and Intellecap is currently in talks with six organisations on the sell side and has working relationships with 10 entities on the buy side. As Intellecap grows and with the huge interest in the microfinance sector, this could soon turn out to be its largest business in the coming years.

“There is a complete dichotomy between the entrepreneurs of some of these socially-focused ventures and the investors who fund them. The entrepreneurs are talking about the poor and the investors are talking term sheet and drag along clauses — there is a fear psychosis when you talk about financing,” says about the need for such an advisory service.

Earlier this month, Intellecap itself got an $8.4 million investment from Legatum. It intends to use these funds to expand globally with centres in Amsterdam, London and Africa. “Amsterdam and London is where the money supply is and places like Africa and Asia is where this money is needed the most,” says Rai. Currently, Intellecap’s operations are spread between Hyderabad, which is emerging as the MFI hub of the country, and Mumbai. “Our entire team is below 30. I’m oldest person around,” says Vineet, all of 35.

What is Micro Financing?

Microfinance refers to the provision of financial services to low-income clients, including the self-employed. The term also refers to the practice of sustainably delivering those services. More broadly, it refers to a movement that envisions “a world in which as many poor and near-poor households as possible have permanent access to an appropriate range of high quality financial services, including not just credit but also savings, insurance, and fund transfers".

About Intellecap:

Intellecap is focused on the multiple bottom-line investment industry. As such, they offer services to various players within this space including investors, enterprises, entrepreneurs, multi-lateral development agencies, policy makers, and many others.

In order to intelligently allocate capital, they provide these diverse players with individualized services that range from investment banking, enterprise development, research, and trainings, to knowledge management and thought leading publications to develop the multiple bottom-line industry as a whole.

Working in both indirect strategic advisory roles and direct design and execution, Intellecap leverages its understanding of mainstream, profit-oriented business models to create unique solutions that create multiple bottom-line returns.

Article Resources:
Author: N Shivapriya is the cheif editor in the Economic Times and the article appeared in one of their successful columns called "Starship Enterprise". For more information on Intellecap log on Successful Entrepreneur: Micro Financing