Favafond learnt the following lessons during the visit to microStart:

1. Credit decisions – Keep control on your credit risks from an early start and when expanding business make sure that chosen prioritisation between social and financial purpose is clear to everyone and that all credits are approved according to similar procedures if in different venues. When using a credit score, it is important to follow up on the model to see if it gives the correct incentives and/or risk assessment on customers. The breakdown of the credit score, i.e. the factors used when creating the credit score, should not be known by credit advisors to safeguard misuse of the risk assessment.

2. Advice/marketing – Be conscious on how to market your lending capacity, strategise not only ads but also how you follow up with potential customers, be visible where you want to find your entrepreneurs.

3. IT platform – Be conscious when picking the system platform but not overly concerned at an early stage. It might be that the flexibility from using excel as a tool is worth having in the beginning (despite operational risks) in order to build experience and knowledge so that the requirements can be more accurate on the solutions asked for in the system platform. The more precise the solution requirements, the better the final choice of platform will be. The legacy of IT systems stays within the organisation for many years so it’s important to choose wisely. If possible, chose a system that gathers both client information and loan information in the same system/module so that analysis and reports can be easily built and assessed. System costs are affected by licenses for underlying systems not only licences for the system adaption. As an example, for the system Favafond is looking at, Singlify, there’s an additional fee for licences in Salesforce per user.

4. Risk management – While still using excel reporting to monitor risks, keep this tool as updated and on point as possible. It’s important to take immediate action in organisations when loan disbursements are not paid according to the plan. As regards internal procedure: the handling of the late payment for the first 6 months should be handled by the credit advisor as first agent. In the event they are not successful, the handling should be transferred to separate staff/departments. In the collection of bad loans, personal contact with a new person (separated from the credit advisor) is key in order to start afresh with contacting the customer and increasing the probability of pay-back (this last suggestion made its way to microStart via experience from Adie, France).

5. In general –

• Turn-over in staff at microStart has been high and it requires that all procedures and routines are documented in an orderly way.
• MicroStart’s inheritance from Adie is strong where social inclusion is prioritised ahead of financial inclusion and this can be reflected in the bottom line of microStart, which has not yet reached break even 10 years after its incursion in the market. This goes in hand with the core mission of the organisation stated before.
• Many IT and management consultancy firms offer pro-bono rates so whenever possible ask for not-for-profit rates. Favafond’s experience from this is that in Sweden it’s not very common with not-for-profit organisations and hence there is not much competition for professional and experienced advice with special rates for not-for-profit.