Developed by Gilbert & Samuels Company Limited Suva, Fiji Email : [email protected] August –...
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ADFIP Strategic Plan 2014- 2018 Developed by Gilbert & Samuels Company Limited Suva, Fiji Email : [email protected]August – October 2013 1 Association of Development Financing Institutions in the Pacific
Developed by Gilbert & Samuels Company Limited Suva, Fiji Email : [email protected] August – October 2013 1 Association of Development Financing Institutions
Developed by Gilbert & Samuels Company Limited Suva, Fiji
Email : [email protected] August October 2013 1 Association of
Development Financing Institutions in the Pacific
Slide 2
What are your Expectations? Where do you see the ADFIP in 5
years? What is the Vision?What is the Mission?What are the
Strategic Goals? What are the actions to deliver Strategic Goals?
Methodology 2 Association of Development Financing Institutions in
the Pacific Environment : Internal External Trends
Slide 3
View of ADFIP As Is 3 Key : Very Poor Adequate Excellent 1 2 3
4 5 Association of Development Financing Institutions in the
Pacific
Slide 4
Expectations State : Need to grow (and be more like ADFIAP) or
lose relevancy. Need for raise capacity and increase resources
Function/Purpose : Increased assistance to members ADFIP to justify
existence and prove its relevance by assisting in the advancement
of member DFIs Improve things such as training for staff Increased
knowledge sharing and experience among members DFIs to improve
networking amongst themselves and share more experience to optimize
costs Develop training modules and programs relevant to members
training needs and requirements Assist members with securing
additional capital and funding 4 Association of Development
Financing Institutions in the Pacific
Slide 5
Expectations Function/Purpose (cont.d) : Harmonise member
efforts on common strategic activities: eg financing for renewable
energy and energy efficiency programs. Work more closely as a team
to address issues of global warming and renewable energy Complete
and keep ongoing member benchmarking Regularly update members on
office matters/member news Act as member representatives to
regional meets/conferences/ events Grow partnership organisations
and advocate for ADFIP members Enhance coordination with members
and strategic partners/donors Be a stronger spokesman and player
within the financial sector of the Pacific region 5 Association of
Development Financing Institutions in the Pacific
Slide 6
Expectations (cont.d) Given borrowing constraints/capacity of
individual members and limitations to operate on a regional basis,
consider studying development of a regional public/private
financial institution, such as a Pacific Investment Bank Learn from
experience of PIPSO 6 Association of Development Financing
Institutions in the Pacific
Slide 7
Where do you see ADFIP in the next 5 years? Depends on the
strategic plan members will put in place and how effective it will
be An organization with more resources and capacity to be able to
deliver on its mission and assist individual members with their
unique and respective needs More important role and spokesman
Stronger links to development partners and regional organisations
Stronger and more frequent governance system Doing things that
ADFIP normally do but not doing now ADFIP to grow and be more
active in partnering with other international organisations to
attract assistance of international organizations for ADFIP members
Particularly, members who are too small to deal with the
international organisation themselves 7 Association of Development
Financing Institutions in the Pacific
Slide 8
Where do you see ADFIP in the next 5 years? ADFIP to remain as
a body. Relevance in the changing landscape of Pacific Islands
region is a concern ADFIP is seen not just as a central body, but
also as a trusted advisor to members as outlined in the words of
the vision: anticipate; respond; create. Unless members are serious
and committed in bringing about major change in the role of ADFIP,
things may not progress too far ahead from they are at present
ADFIP to be developed to a much closer and stronger network of DFIs
providing relevant banking solutions for Pacific Island nations
ADFIP can develop a data base of DFIs information/data that members
can access ADFIP should stress the role of Development Bank for the
financing of renewable energy and energy efficiency projects. More
strategic alliances with commercial banks 8 Association of
Development Financing Institutions in the Pacific
Slide 9
Suggested Vision Suggested Vision after Phase 1 Survey : To
provide premier services to our members that will bring about
increased prosperity for their customers while contributing to the
economic development of Pacific Island Countries 9 Association of
Development Financing Institutions in the Pacific
Slide 10
Suggested Vision (cont.d) Comments from Survey Phase 2 : To be
the ultimate resource for development finance services and be the
most influential advocate for financial inclusion effectively
collaborating for regional solutions. To be the pre-eminent
knowledge and advocacy focal point of financing sustainable
development in the Pacific region. Revision 1: Successfully serve
our members to sustain prosperous economies for all our people in
the Pacific. Revision 2:Serve our members to sustain prosperous
economies for all our people in the Pacific. Revision 3: Serve our
members to sustain prosperous economies for our people in all
Pacific Island Countries. 10 Association of Development Financing
Institutions in the Pacific
Slide 11
Suggested Vision (cont.d) Comments from Survey Phase 2 :
Setting high expectations with the formulation of premier services
especially in consideration of staff and organisational constraints
of the ADFIP Secretariat and the governance system It should not
only include economic development but also mention social
development and combat of impacts caused by climate change. Perhaps
include the words effectively and efficiently to stress the aim of
enhancing the members financial sustainability and capacity. The
visions should to be linked to the particular challenges their
members face, be they regulatory, funding, sectoral in promoting
development finance. 11 Association of Development Financing
Institutions in the Pacific
Slide 12
Suggested Vision (cont.d) Revised Vision Suggested : 12 To be
the premier knowledge and advocacy focal point in the financing of
sustainable economic and social development within the Pacific
Islands region. Association of Development Financing Institutions
in the Pacific
Slide 13
Suggested Mission Suggested Mission after Phase 1 Survey : We
contribute to development finance initiatives in Pacific Island
Countries by enhancing the capacity of our members through :
advocating development finance and its benefits training and
capacity development building and coordinating relationships with
other providers of similar services and donor agencies, and
providing other advisory services that our members need. 13
Association of Development Financing Institutions in the
Pacific
Slide 14
Suggested Mission (cont.d) Comments from Survey Phase 2 :
Sounds OK except that you need to also mention something about
sustaining membership Revision: ADFIP will contribute in an
efficient, responsive and collaborative manner to development
finance initiatives that enhance the capacity of our members
through: advocating development finance issues and their benefits
(suggest a verb to start the sentence as with the other points)
training and capacity development building and coordinating
relationships between members, other providers of similar services
and donor agencies, and providing other advisory services that our
members need. 14 Association of Development Financing Institutions
in the Pacific
Slide 15
Suggested Mission (cont.d) Comments from Survey Phase 2 : To
contribute to the sustainable development of the Pacific by
advancing development finance programs and practices through
knowledge-sharing, training and capacity enhancement, advisory
support, building partnerships and advocacy work. Suggest rewording
to: advocating development finance benefits and possible issues in
the policy dialogue with Governments and the dialogue with other
stakeholders It should also include something on sustaining
membership or membership care and support in order to maintain
level of members Proposal of a three-fold mission; (i) promoting
training and development amongst its members, (ii) influencing
development of national and regional policies and legal frameworks
and (iii) facilitating access and integration with regional and
international financial institutions such as the EIB. 15
Association of Development Financing Institutions in the
Pacific
Slide 16
Suggested Mission (cont.d) Revised Mission Suggested : 16 We
contribute in an efficient, responsive and collaborative manner
that sustains our membership, to the sustainable development of
Pacific Island Countries by : advocating development finance
benefits and practices facilitating training and capacity
development of our members building partnerships between members,
with Governments, providers of similar services, donor agencies and
other stakeholders providing other advisory services that our
members need. Association of Development Financing Institutions in
the Pacific
Slide 17
External Trends Current Political/financial relationship with
the (US) government Long-term funding sources Mobilising and
leveraging affordable funds Declining level of funding under the
Compact with (US) government Competition in the financial sector
Rapid technological changes, especially those connecting the
islands (telecommunication and transportation) Roles,
responsibilities, and priorities of donor countries Limited market
prospects for products developed that hinder prospect of new
developments within a country Climate changes affecting small
island countries 17 Association of Development Financing
Institutions in the Pacific
Slide 18
External Trends Current Ongoing threat of commercial banks
stealing good clients after development banks helped establish and
set up clients Note : A clients move to a commercial bank is
usually a commercial decision e.g. lower interest rates. This is a
good indicator that Development Banks are successfully fulfilling
their role i.e. assisting business clients establish themselves to
a level that they are sufficiently strong to venture into a more
competitive financial market. Present trends towards financial
literacy and inclusion to reduce poverty ADBs move away from
advocating the Development Bank model Members strategic alignment
with National Development plans Regional recognition / alignment /
perception of ADFIP and member development banks (financial
institutions) and bank model in terms of financial performance and
governance 18 Association of Development Financing Institutions in
the Pacific
Slide 19
External Trends Current (cont.d) Members own recognition
in-country by Government, business community, general community
ADFIP lacks the level of recognition it deserves from the
respective Governments of each member country Although majority of
member countries have small economies and are geographically
scattered, they face similar challenges and have common needs
Members individual efforts to resolve economic issues may not be as
effective as that of a consolidated regional approach through ADFIP
Current economic conditions likely to continue for the duration of
the planned period Continuing low interest on deposits leading to
reduced cost of funding for DFIs Pressure to reduce lending rates
so that benefits of reducing cost of funds can be shared with the
customers 19 Association of Development Financing Institutions in
the Pacific
Slide 20
External Trends Current (cont.d) DFIs need to know how to align
their operations and services in order to address the impact these
external factors (e.g. regional/global issues including Climate
Change, Renewable Energy, Environment and Social Impact
Assessments, Carbon Credits, etc) may have in the respective
economies in which they serve ADFIP should access appropriate
resources and expertise on behalf of member DFIs to assist them
facilitate necessary adjustments in response to these external
factors. DFIs have evolved to meet the challenges in the financial
markets Greed of players in the financial systems (banks,
investment banks, mortgage brokers, financial planners etc) blamed
for current global economic and financial difficulties Strategies
developed not to lose sight of global trends and identify means to
mitigate the trends for island economies 20 Association of
Development Financing Institutions in the Pacific
Slide 21
External Trends Future Environmentally friendly projects Change
in potential membership organisations i.e. Housing Finance, Micro
Finance, etc Source of funds for members portfolio growth
Technology and how member organisations interact with their clients
Changing and evolving client expectations Member countries
regulatory environments : Anti Money Laundering etc DFIs to
consolidate efforts towards promoting the use of renewal energy
i.e. move towards use of wind and solar power and away from fossil
fuels Ongoing improvement in the use of technology to provide
banking services ADFIP Secretariat to build relationships with
appropriate bodies and be abreast with developing trends to be able
to advise members 21 Association of Development Financing
Institutions in the Pacific
Slide 22
External Trends Future (cont.d) Impact of global warming in the
Pacific Islands nations to continue to be a reality and will become
a major threat to DFIs way of doing business, especially in small
land low lying islands Government support & relationship
Expiring political/financial relationship with US government
Enabling policies and incentives Arms length relationship
Performance & impact measurement To include options to support
ADFIP members seek more commercial activities Role in the financial
system Capital market catalyst Complementarity and additionality 22
Association of Development Financing Institutions in the
Pacific
Slide 23
Internal Trends Governance & Management Dimensions
Strategic visioning and direction: balancing between mission &
sustainability Board-Management structure & processes Financial
discipline & risk management Corporate culture & human
capital strengthening Reputation & brand building 23
Association of Development Financing Institutions in the
Pacific
Slide 24
Operational Challenges of DFIs World Bank/World Federation of
DFIs Survey Based on the World Bank & World Federation of DFIs
survey, with the assistance of ADFIAP as WFDFI Secretariat, the
following are key operational challenges of DFIs: What are the most
important challenges faced by your institution going forward? % of
DFIs Improve loan recovery ratio83% Improve risk-management
capacity76% Become financially self-sustainable71% Diversify
business operations63% Improve corporate governance and
transparency50% Acquire more flexibility to hire and retain highly
qualified staff 45% Reduce undue political interference38% 24
Association of Development Financing Institutions in the
Pacific
Slide 25
Strategic Goals for the next 5 years Comments from Phase 2
Survey : The acronym is SPARK which stands for the following:
Sustaining Membership Promoting Advocacy Advancing Human Capital
development Revving up resources Keeping alliance Strategic Goal 1:
Advocate development finance issues and their benefits Strategic
Goal 2: training and capacity development Strategic Goal 3:
building and coordinating relationships with other providers of
similar services and donor agencies Strategic Goal 4: providing
other advisory services that our members need 25 Association of
Development Financing Institutions in the Pacific
Slide 26
Strategic Goals for the next 5 years Comments from Phase 2
Survey (cont.d) : 1. To establish a formal relationship with the
Forum Secretariat as the agency that Forum members acknowledge as
the conduit for financial assistance from the international
financial institutions and other donor agencies of the world 2. To
establish formal relations with all donor agencies to be the
conduit for assistance to the various members of ADFIP. 3. To raise
funding by organizing relevant trainings programs in Fiji. 4. To
solicit donor contribution to the activities of ADFIP. 5. To make
ADFIP relevant to the changes conditions of the world, in terms of
technology, climate change, financial literacy, improvement of
womens participation in economic development and food security. 26
Association of Development Financing Institutions in the
Pacific
Slide 27
Strategic Goals for the next 5 years Comments from Phase 2
Survey (cont.d) : L iven up membership: this means increasing both
members base and benefits, engaging more with its members, partners
and donors as well as enhancing business model growth and brand
equity I mprove people and institutional capacities: this connotes
enhancing knowledge access through training and capacity-building
as well as consulting and advisory services through pooling of
expertise and partnerships N urture advocacy work and partnerships:
this appertains to leveraging the avowed mission of DFIs as
development catalysts and trailblazers and promoting the same to
its constituencies and to the public-at-large through alliances and
cooperation with like-minded organizations, partners and donors. K
eep enhancing financial capacity: this relates to increasing and
sustaining financial resources needed to operate the association
effectively and efficiency 27 Association of Development Financing
Institutions in the Pacific
Slide 28
Strategic Goals for the next 5 years Comments from Phase 2
Survey (cont.d) : Increase members and strategic alliances with
external parties and organisations Enhance reputation and brand
image Increase financial resources and sources of funding Improve
marketing and develop/implement a communication plan 28 Association
of Development Financing Institutions in the Pacific
Slide 29
Strategic Goals for the next 5 years [This covers all
suggestions provided by other respondents to Phase 2 Survey.] 29 C
develop Capacity and human resources R rev utilisation of Resources
E Establish alliances A Advocate development finance issues and
benefits M strengthen Membership Association of Development
Financing Institutions in the Pacific
Slide 30
Strategic Goals for the next 5 years CREAM Association of
Development Financing Institutions in the Pacific 30
Slide 31
Actions to achieve Strategic Goals Comments from Phase 2 Survey
: Present a proposal to Forum Secretariat seek endorsement from the
Forum member countries to recognize ADFIP and its roles. Establish
formal relations with ADFIAP, ADFIM and other similar regional
organization to learn from them. Establish relations with the
multilateral development organizations, like ADB, World Bank,
European Investment Bank, Japan Development Bank and related
organizations that could provide both financial and technical
assistance to the small Pacific Island DFIs. More frequent
membership consultations and improve membership benefits Knowledge
sharing and hub (e.g. via website) 31 Association of Development
Financing Institutions in the Pacific
Slide 32
Actions to achieve Strategic Goals Comments from Phase 2 Survey
(cont.d): Issue awareness programme by sharing problems and
experiences amongst members, e.g. semi- or annual consultations
also by email Quarterly newsletter also for external audience to
promote the brand ADFIP as well as its members through coverage of
major events and achievements Increase in financial resources but
also sources (grant financing or support for SME financing) and
identification should also be carried out by members of the
Management Committee Enhance ADFIPs financial sustainability to
ensure objectives and programmes to be carried out Communication
Plan with ADFIP website Realistic and fundable training plan for
ADFIP members that could also include e-learning programmes 32
Association of Development Financing Institutions in the
Pacific
Slide 33
Actions to achieve Strategic Goals 33 Association of
Development Financing Institutions in the Pacific Comments from
Phase 2 Survey (cont.d):
Slide 34
Actions to achieve Key Strategies Strategies : C R E A M
Actions suggested for C develop Capacity and human resources 34
Review and enhance human resource numbers and capacity of ADFIP
Secretariat Enhance knowledge access through training and capacity
building Identify training needs of members Develop and offer
training modules and programs relevant to members needs Facilitate
the provision of other technical training for which the ADFIP does
not have expertise Offer or coordinate consulting and advisory
services through pooling of expertise and partnerships develop C
apacity and human resources Association of Development Financing
Institutions in the Pacific
Slide 35
Actions to achieve Key Strategies Strategies : C R E A M
Actions suggested for R rev utilisation of Resources 35 Increase
capacity and resources of ADFIP Harmonise member efforts on
strategic activities/needs e.g. financing for renewable energy and
climate change Coordinate the search for, and disbursement of,
financing from external donors for common activities e.g. renewal
energy and climate change or development finance, in general
Coordinate access and provision of technical expertise to members
on issues of common concern Develop, implement and monitor member
benchmarking Develop a database of information/data of technical
information for members use Strengthen corporate governance
frameworks and policies of each member rev utilisation of R
esources Association of Development Financing Institutions in the
Pacific
Slide 36
Actions to achieve Key Strategies Strategies : C R E A M
Actions suggested for E Establish alliances 36 Identify, seek and
establish strategic alliances with regional or international
stakeholders including international financial institutions
Strengthen links with development partners Establish and/or
strengthen links with funding organisations and donors e.g EIB,
ADB, IFC, JBIC, CDE Update these stakeholders regularly on
activities of ADFIP and DFIs in the Pacific, especially when funds
have been obtained from them E stablish alliances Association of
Development Financing Institutions in the Pacific
Slide 37
Actions to achieve Key Strategies Strategies : C R E A M
Actions suggested for A Advocate development finance issues and
benefits : 37 Develop and carry out advocacy of development finance
issues and benefits Advise and advocate for appropriate legal
frameworks for development finance in Pacific Island Countries
Coordinate collaboration of technical issues with Governments and
other stakeholders for members Be a better spokesman on the role of
development banks within the financial sector of Pacific Island
Countries Promote a stronger network for DFIs to provide relevant
banking solutions to Pacific Island Countries A dvocate development
finance issues and benefits Association of Development Financing
Institutions in the Pacific
Slide 38
Actions to achieve Strategic Goals Strategies : C R E A M
Actions suggested for M strengthen Membership : 38 Increase
membership base and benefits Improve networking among members
Initiate and organise members activities for interaction and
sharing of knowledge and ideas Up date members regularly on ADFIP
and other technical matters of importance to DFIs strengthen M
embership Association of Development Financing Institutions in the
Pacific
Slide 39
Prioritising actions to achieve Key Strategies 39 Association
of Development Financing Institutions in the Pacific ActionsHML
Review and enhance human resource numbers and capacity of ADFIP
Secretariat Enhance knowledge access through training and capacity
building Identify training needs of members Develop and offer
training modules and programs relevant to members needs Facilitate
the provision of other technical training for which the ADFIP does
not have expertise Offer or coordinate consulting and advisory
services through pooling of expertise and partnerships Actions for
develop Capacity and human resources
Slide 40
Prioritising actions to achieve Key Strategies 40 Association
of Development Financing Institutions in the Pacific ActionsHML
Increase capacity and resources of ADFIP Harmonise member efforts
on strategic activities/needs e.g. financing for renewable energy
and climate change Coordinate the search for, and disbursement of,
financing from external donors for common activities e.g. renewal
energy and climate change or development finance, in general
Coordinate access and provision of technical expertise to members
on issues of common concern Develop, implement and monitor member
benchmarking Develop a database of information/data of technical
information for members use Strengthen corporate governance
frameworks and policies of each member Actions for rev utilisation
of Resources
Slide 41
Prioritising actions to achieve Key Strategies 41 Association
of Development Financing Institutions in the Pacific ActionsHML
Identify, seek and establish strategic alliances with regional or
international stakeholders including international financial
institutions Strengthen links with development partners Establish
and/or strengthen links with funding organisations and donors e.g
EIB, ADB, IFC, JBIC, CDE Update these stakeholders regularly on
activities of ADFIP and DFIs in the Pacific, especially when funds
have been obtained from them Ongoing Actions for Establish
alliances
Slide 42
Prioritising actions to achieve Key Strategies 42 Association
of Development Financing Institutions in the Pacific ActionsHML
Develop and carry out advocacy of development finance issues and
benefits Advise and advocate for appropriate legal frameworks for
development finance in Pacific Island Countries Coordinate
collaboration of technical issues with Governments and other
stakeholders for members Be a better spokesman on the role of
development banks within the financial sector of Pacific Island
Countries Promote a stronger network for DFIs to provide relevant
banking solutions to Pacific Island Countries Actions for Advocate
development finance issues and benefits
Slide 43
Prioritising actions to achieve Key Strategies 43 Association
of Development Financing Institutions in the Pacific ActionsHML
Increase membership base and benefits Improve networking among
members Initiate and organise members activities for interaction
and sharing of knowledge and ideas Up date members regularly on
ADFIP and other technical matters of importance to DFIs Actions for
strengthening Membership
Slide 44
Review of the Strategic Plan 44 Association of Development
Financing Institutions in the Pacific Implement actions relevant to
current year from Strategic Plan Review environment Review
strategic goals Review actions to be implemented over next calendar
year and priorities Third quarter of calendar year
Slide 45
Proposed Organisation Structure Justifications for changes to
organisation structure : Staff numbers and capacity identified as
areas needing improvement Structure to be in place should suit
mission/goals/ strategies/work set out in the Strategic Plan Need
to combine trustee and ADFIP Secretariat avoid confusion and
bureaucracy through additional organisation/layers to deal with
Having a good structure in place with appropriate oversight by a
Board a step in the right direction to a stronger institution
Association of Development Financing Institutions in the Pacific
45
Slide 46
Proposed Organisation Structure (cont.d) Justifications for
changes to organisation structure : (cont.d) Strong organisation
(supported by a good/robust structure) better able to advocate
issues and collaborate with stakeholders and donors Strong and
independent organisation (i.e. able to make its own decisions
through its Board and implement strategies identified) will enable
the organisation to push through its work and serve members At the
moment most decisions and actions are only discussed/passed at
annual meetings [Structure proposed to be implemented over a 3 year
period to enable organisation to deliver strategies identified in
the Strategic Plan and justify changes] Association of Development
Financing Institutions in the Pacific 46
Slide 47
Proposed Organisation Structure (cont.d) 47 Association of
Development Financing Institutions in the Pacific Management
Committee Executive Officer Accounts Officer Organisation Structure
in Year 1 of Strategic Plan Notes : 1) Minimum qualifications for a
Accounts Officer is a degree in a relevant discipline with 2 years
relevant work experience
Slide 48
Proposed Organisation Structure (cont.d) 48 Association of
Development Financing Institutions in the Pacific Board of
Directors Chief Executive Officer Project Officer Accounts Officer
Organisation Structure towards end of Year 2 of Strategic Plan
Notes : 1) Minimum qualifications for a Project Officer is a degree
in a relevant discipline with 2 years relevant work experience
Slide 49
Proposed Organisation Structure (cont.d) 49 Association of
Development Financing Institutions in the Pacific Board of
DirectorsChief Executive Officer Project Officer (Advocacy,
Strategic Alliances and Stakeholder and Donor Issues) Project
Officer (Training/Capacity Building and Members Issues) Accounts
Officer Organisation Structure for Year 3 of Strategic Plan Notes :
1) Minimum qualifications for a Project Officer is a degree in a
relevant discipline with 2 years relevant work experience
Slide 50
Proposed Organisation Structure (cont.d) 50 Association of
Development Financing Institutions in the Pacific Board of
DirectorsChief Executive Officer Project Officer (Advocacy,
Strategic Alliances and Stakeholder and Donor Issues) Project
Officer (Training/Capacity Building and Members Issues) Project
Officer (if justified) Accounts Officer Organisation Structure in
Year 4 of Strategic Plan Notes : 1)Minimum qualifications for a
Project Officer is a degree in a relevant discipline with 2 years
relevant work experience
Slide 51
Developed by Gilbert & Samuels Company Limited Suva, Fiji
Email : [email protected] August October 2013 51 Association
of Development Financing Institutions in the Pacific
Slide 52
Methodology Source Documents : Financial reports/information,
Draft Strategic Plan Analyse ADFIPs current structure, staffing,
financing and costs for the last five years. Identify and evaluate
current financial and operational issues. Review and develop an
in-depth understanding of the strategies, operations, processes,
policies, procedures, organisation structure and more importantly
the financial affairs of the business. As part of this, we review
the actions identified in the draft Strategic Plan to be
implemented over the next five years. Analyse and evaluate the
information provided and develop a financial model for financial
forecasting over five years. Update and validate data/information
onto the financial model. This includes updating the financial
model including linking of the profit and loss and balance sheet.
Cash flows forecasts for the next five years are summarised in the
movement in the cash account on the Balance Sheet. Association of
Development Financing Institutions in the Pacific 52
Slide 53
Methodology (cont.d) Evaluate the financial viability of the
ADFIP Secretariat as a stand-alone entity with current and
potential forecasts. In assessing viability, we consider options
for the organisational structure in terms of operations and human
resources requirements. Identify key financial and operational
issues, threats and weaknesses from the financial analyses and
identify strategies for mitigating these issues. Identify and
suggest practical options for the structure and operations of
ADFIP, particularly its effectiveness, in view of the entitys
objective to becoming a viable stand-alone operation. Association
of Development Financing Institutions in the Pacific 53
Slide 54
Profit & Loss Profit and Loss for the years ended 31
December 2014 to 31 December 2018 is prepared in conjunction with
the 5 Year Strategic Plan from 2014 2018. Certain key assumptions
adopted and it is critical that key assumptions are fulfilled to
ensure the entity achieves the forecasted results for the 5 years
as per strategic plan. Association of Development Financing
Institutions in the Pacific 54
Slide 55
Profit & Loss (cont.d) Assumptions : Subscription income
Assumed to increase to by 50% in 2014 to $37,113 and a further 50%
in 2015 to $55,670. Subscription income will be maintained at
$55,670 in 2016 and 2017. 2018 subscription income will increase be
an additional 50% to $83,505. Currently, allocation is consistent
across all members and there is no due consideration of the level
of activities and operations, financial performance and balance
sheet size and staffing structure. To increase the subscription, it
is recommended that a more equitable allocation be implemented that
takes into consideration these factors. For example, Fiji
Development Bank and National Development in PNG could be levied a
higher subscription as they are the larger development bank in the
region in comparison to Development Banks in Tuvalu and Kiribati.
Association of Development Financing Institutions in the Pacific
55
Slide 56
Profit & Loss (cont.d) Assumptions (cont.d) : Interest
income Derived from Term Deposits held with commercial banks and
financial institutions. Interest income for 2013 has been increased
by 5% from 2012 based on the assumption that the level of
investment in term deposits in 2013 is the same level as 2012 at
$911,611. From 2014, term deposit will reduce to $681,611 and this
is consistent across the 2 years to 2016. Major factor driving the
reduction is the withdrawal of $230,000 for purchase of fixed
assets in 2014. We have assumed an interest rate of 3% per annum.
This has resulted in interest income of $20,448 for 2014 and 2015.
From 2017, the term deposit increases to $811,611 due to
improvement in cash flows and available of surplus funds for
investments. The additional investment in term deposit of $200,000
increases interest income to $26,448 at 3% for annum. The interest
income is consistent for 2017 and 2018. Association of Development
Financing Institutions in the Pacific 56
Slide 57
Profit & Loss (cont.d) Assumptions (cont.d) : Grant income
A grant in 2011 was provided by the Centre for Development
Enterprise (CDE) being for training of Chief Executive Officers of
member countries. ADFIP should attract donor agencies that will
provide financial for projects that are aligned to the strategies
of ADFIP. This will help with recruitment of project officers who
will assist with implementing Strategic Plan. There should be a
portion to cover general administration of the ADFIP, which should
assist in meeting the administration and operating expenses. The
amount recognized in the profit and loss relates to the portion
that should be released to income on a yearly basis. The assumption
for annual grant income expected to be received are: Association of
Development Financing Institutions in the Pacific 57
Slide 58
Profit & Loss (cont.d) Assumptions (cont.d) : Other income
Based on the averages for the past 4 years. For example, 2014 other
income is based on averages of 2010 to 2013 financial years, and so
forth. Other income is not a significant revenue stream, which is
appropriate considering ADFIPs operations. Fair value
gains/(losses) Relates to the unrealised gain and loss from the
movements in the investments in Unit Trust of Fiji. Based on the
averages for the past 4 years. For example, 2014 fair value gain is
based on averages of 2010 to 2013 financial years, and so forth.
Association of Development Financing Institutions in the Pacific
58
Slide 59
Profit & Loss (cont.d) Assumptions (cont.d) : Audit fees
Assumed at $5,000 for 2014. We have applied the inflation rate of
3% from 2015 and thereafter. Bank fees Assumed as the averages for
the past 4 years. For example, 2014 bank fees are based on averages
of 2010 to 2013 financial years, and so forth. Consultancy fees
Expected to be funded from grant monies. Assumed as the averages
for the past 4 years. For example, 2014 consultancy fees are based
on averages of 2010 to 2013 financial years, and so forth.
Association of Development Financing Institutions in the Pacific
59
Slide 60
Profit & Loss (cont.d) Assumptions (cont.d) : Rental
expenses For 2014, ADFIP assumed to continue to operate from the
FDB office paying $300 a month in rental. However, from 2015 with 3
staff, it is assumed that they will relocate to a new office paying
$4,000 per month. Telephone expenses Assumed to increase in line
with the level of activities and staffing. The monthly rates for
each year are as follows: 2014 - $200; 2015 - $500; 2016 - $800;
and 2017/2018 - $1000. Electricity expenses Assumed to increase in
line with the level of activities and staffing. The monthly rates
for each year are as follows: 2014 - $200; 2015 - $500; 2016 -
$800; and 2017/2018 - $1000 Association of Development Financing
Institutions in the Pacific 60
Slide 61
Profit & Loss (cont.d) Assumptions (cont.d) : Salaries and
Wages Assumed that salaries for positions will be as follows:
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61
Slide 62
Profit & Loss (cont.d) Assumptions (cont.d) : Salaries and
Wages (cont.d) Based on the proposed structure in the strategic
plan the breakdown of salaries and wages are as follows: (Refer
Organisation Structure by Year shown earlier) Association of
Development Financing Institutions in the Pacific 62
Slide 63
Profit & Loss (cont.d) Assumptions (cont.d) :
FNPF/Superannuation expenses FNPF expense relates to the employers
contribution of 8% on the gross salaries and wages. Training and
development Assumed significant investments in training development
at $50,000 in 2014 and $100,000 for 2015 to 2018. With the
restructure of the entity and increases in members subscriptions
and donor grants, there will be higher expectation in the provision
of training and developments. Training programs will focus both on
internal staff and for staff in member organisations. In accordance
with the Strategic Plan, ADFIP and members will training needs for
members. Association of Development Financing Institutions in the
Pacific 63
Slide 64
Profit & Loss (cont.d) Assumptions (cont.d) : Travel and
accommodation Travel and accommodation has been assumed at $40,000
for 2014 and $60,000 thereafter. Other expenses Other expenses have
been assumed as the averages for the past 4 years. For example,
2014 other expenses are based on averages of 2010 to 2013 financial
years, and so forth. Association of Development Financing
Institutions in the Pacific 64
Slide 65
Association of Development Financing Institutions in the
Pacific 65
Slide 66
Balance Sheet Assumptions : The Balance Sheet consolidates the
information for The Association of Development Financing
Institutions in the Pacific and The Association of Development
Financing Institutions in the Pacific Trustee Limited. The balance
sheet figures disclosed from 31 December 2009 and 31 December 2012
is based on the audited financial statements. Balance sheet for
years ended 31 December 2014 to 31 December 2018 is prepared in
conjunction with the 5 Year Strategic Plan from 2014 2018. Certain
key assumptions adopted and it is critical that these key
assumptions are fulfilled to ensure the entity achieves the
forecasted results for the 5 years as per strategic plan. The key
assumptions are set out below. Association of Development Financing
Institutions in the Pacific 66
Slide 67
Balance Sheet (cont.d) Assumptions (cont.d) : Cash at bank
Taken as the balancing figure in the balance sheet taking into
consideration the net movements of all liabilities, assets, and
equity accounts. Fixed assets Assumed that the entity will invest
in fixed assets in 2014 to the amount of $230,000. Also assumed
that the motor vehicle will be replaced in 2018 after being fully
written down. The breakdown is as follows: Association of
Development Financing Institutions in the Pacific 67
Slide 68
Balance Sheet (cont.d) Assumptions (cont.d) : Short term
investments Consists of term deposits held with commercial banks
and financial institutions. In 2014, assumed that the $230,000
acquisition of fixed assets will be funded from the term deposits.
Accordingly, term deposit is reduced by this amount in 2014. In
2016, an additional $200,000 is injected to the term deposits due
to improved cash flows during the year. Long term investments
Consists of investments in Unit Trust of Fiji. Assumed as the
averages for the past 4 years. For example, 2014 other expenses are
based on averages of 2010 to 2013 financial years, and so forth.
Association of Development Financing Institutions in the Pacific
68
Slide 69
Balance Sheet (cont.d) Assumptions (cont.d) : Other receivables
Assumed as opening balance plus 10% of the subscription income in
the Profit and Loss for the current year. This means that it is
assumed that 90% of the subscription income would be collected in
cash during the year. For example, other receivables for 2013
include the 2012 closing balance of $106,735 and 10% of the
subscription income in 2013 of $24,742. Therefore its $106,735 +
2,474 = $109,209. Assumed that the opening balance is not
recoverable as the audited financial statements indicates a high
other receivables balance for 2011 and 2012. This may indicate
recoverability of opening balance of other receivables. Although
ageing of debtors has not been considered, this assumption is
appropriate for regional institutions. Association of Development
Financing Institutions in the Pacific 69
Slide 70
Balance Sheet (cont.d) Assumptions (cont.d) : Trade payables
Assumptions for trade payables include : 90% of prior year balance
to be paid in current year. This means that 10% remains unpaid in
current year. For example, 90% of the $81,981 in 2012 is assumed to
be paid in 2013. Audit fees is fully accrued at 100% Salaries and
wages be accrued for one fortnight (last pay period at the end of
the financial year) Travel and accommodation accrued at 10% of
profit and loss amount Other expenses accrued at 10% of profit and
loss amount Association of Development Financing Institutions in
the Pacific 70
Slide 71
Balance Sheet (cont.d) Assumptions (cont.d) : Trade payables
For example, in 2013 the breakdown of trade payables is as follows:
Remaining expenditure lines including consultancy, rental expenses,
telephone expenses, electricity expenses and training and
development are assumed to be settled on a cash basis. Association
of Development Financing Institutions in the Pacific 71
Slide 72
Association of Development Financing Institutions in the
Pacific 72
Slide 73
Key commentaries Financial viability of ADFIP largely dependent
on two major strategic achievements : an increase in members
subscriptions based on the forecasted profit and loss. ability of
the organisation to attract funding from donor agencies to fund
activities and projects and that aligned to the strategies of the
organisation and member countries. If ADFIP fails to achieve the
two outcomes, the restructured organisation will not be financially
viable. It will continue to incur significant losses and severe
deficiencies in cash flows. Association of Development Financing
Institutions in the Pacific 73
Slide 74
Key commentaries Strategic Plan highlights a number of critical
strategic initiatives. Implementing these initiatives will
positively enhance the issues highlighted in the key commentaries.
An increase in members subscription can be implemented quickly as
it requires agreement of a proper subscription policy by the member
countries. Based on the increase of 50% in 2014, our assessment is
that this could be easily achieved and consented to by members.
However, the donor grant, which is more significant, is more
critical as it will involve meeting the expectations of the donors
and developing an effective and robust strategy. Association of
Development Financing Institutions in the Pacific 74
Slide 75
Key commentaries Organization structure as a key driver Need
for the ADFIP to strengthen human resources capacity as outlined in
the Strategic Plan. It is highly critical that ADFIP attracts the
people with the right level of qualification, experience and
technical expertise. The strategic plan sets out the proposed
organization structure from Year 1 to Year 4. Association of
Development Financing Institutions in the Pacific 75
Slide 76
Key commentaries Organization structure as a key driver
(cont.d) Key positions for the entity will include: A suitably
qualified CEO who is able to develop a strategic relationship with
key stakeholders including potential donor agencies and member
countries. CEO to identify relevant projects that donor agencies
would support and provide the required funding. required to be a
strong advocate for development finance issues and benefits.
Position is suitable for a person with experience in senior
management roles and has an in-depth knowledge of development banks
including the environment, culture, operations, activities, people,
challenges and issues. Association of Development Financing
Institutions in the Pacific 76
Slide 77
Key commentaries Organization structure as a key driver
(cont.d) Key positions for the entity will include (cont.d) : A
qualified and experienced finance officer to manage the accounting
system and financial reporting structure of ADFIP. With the planned
increased in activities and donor agencies being involved, the
requirement for effective, timely and accurate financial reports is
crucial. Experienced project officers need excellent project
planning, monitoring and reporting techniques that will ensure
proper allocation of donors funds and a reporting framework that
meets stakeholders requirements. should the projects require
auditing, the project officers should be accountable in maintaining
and providing the required information that will ensure an
unqualified audit report. Association of Development Financing
Institutions in the Pacific 77
Slide 78
Key commentaries Organization structure as a key driver
(cont.d) Note that the proposed salary scale factored into the
financial forecasts reflects the market value in order to get the
right people for each position. These include: Note also that the
above salaries do not include the 8% FNPF employers contribution
and that have included a motor vehicle for the Chief Executive
Officer. Association of Development Financing Institutions in the
Pacific 78
Slide 79
Key commentaries Capacity building for members as a key driver
Capacity building for members is a critical part of the ADFIP
restructure. ADFIP should clearly understand the various challenges
and issues experienced by development banks in the Pacific Islands
region. There should be a collective effort to draw together these
issues and consolidating this in one database. This is the first
phase of this process. Common capacity building issues need to be
identified. Following this, ADFIP can put in place a roadmap to
resolve these key issues with practical and effective action plans.
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Key commentaries Capacity building for members as a key driver
(cont.d) Some of the preliminary options for capacity building
include: building/facilitating capacity through technical training
for members on various topics from finance, credit approval, credit
assessment, credit recovery and arrears management.
building/facilitating capacity through training in the area of
corporate governance, financial reporting, budgeting, strategic
planning, managing ethics and conflict of interests provide
capacity to assist in improving the IT platform of small
development banks. IT is core to any financial institution.
building/facilitating capacity for development and update of key
policies to best industry practice including credit, finance, IT,
HR and corporate governance. facilitate secondment of staff of
small development banks to the larger development banks to further
improve their experience and skills. facilitate secondment of staff
of member institutions to development banks in Asia, Australia, NZ
where ADFIP could develop strategic partnership with in the medium
to long term. Association of Development Financing Institutions in
the Pacific 80
Slide 81
Key commentaries Allocation of members levies Current members
subscription levies an equal amount of F$1,000 for each member
countries to contribute. Current subscription policy does not take
into account the level of operations, activities, loan portfolio,
and financial performance in the various development banks. The
Fiji Development Bank and National Development Bank (PNG)
activities are significantly larger than the development banks in
Tuvalu and Kiribati. Association of Development Financing
Institutions in the Pacific 81
Slide 82
Key commentaries Investments to be maintained Two forms of
investments held are term deposits and unit trust investments. Term
deposit investments provide interest income as illustrated in the
forecasted Profit and Loss. Term deposits will be also be utilised
to acquire fixed assets in light of the growth in operations of
ADFIP. Important that ADFIP maintains these investments and ensure
that it can be diverted to the purchase of fixed assets or fund any
shortfalls in cash flow in future. Association of Development
Financing Institutions in the Pacific 82
Slide 83
Key commentaries Investment restructure With the proposed
restructure of the organisation, it is appropriate to review and
formalise the investment policy for the organisation. While the
previous commentary highlights the importance of maintaining
investments, this commentary highlights the need to have the best
investment option that will provide the highest and consistent
returns to ADFIP. Does the investment in term deposit and unit
trust provide the best returns to ADFIP? Are there any other
investment opportunities that should be considered? Association of
Development Financing Institutions in the Pacific 83
Slide 84
Key commentaries Finance function to be strengthened Finance
function of ADFIP has been effective over the years taking into
account the relative size of the operations and activities. With
the proposed restructure, efficiency of Finance and ability to
produce accurate, reliable and timely reports is critical. There
will be increased expectations for accountability and governance.
Association of Development Financing Institutions in the Pacific
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Conclusion Strategic Plan has set a substantial benchmark for
growth in ADFIP so that it is able to provide the services that are
required of it, to members/non- members. Given that the Strategic
Plan has been developed from feedback received from
members/non-members, it is evident that members/non-members still
recognise the need for an organisation such as ADFIP. While the
organisation may not have been able to carry out its functions
effectively in the past, some inhibiting factors have been
inadequate capacity and staffing, and funding. Association of
Development Financing Institutions in the Pacific 85
Slide 86
Conclusion Critical to achievement of the Mission, strategic
goals and actions identified in the Strategic Plan is the review of
key aspects of the administration of ADFIP i.e. subscriptions that
members/non-members pay, search for and receipt of donor funding to
fund capacity building for ADFIP itself and for
members/non-members, through ADFIP. Feasibility Study provides more
details on the issues that are critical for ADFIP to be a
viable/self sustainable institution. Working on the issues
identified in the Feasibility Study will enable ADFIP to be able to
then deliver on the very optimistic outlook, strategic goals and
actions that it has identified for delivery over the planning
period. Association of Development Financing Institutions in the
Pacific 86
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end Association of Development Financing Institutions in the
Pacific 87