Business Plan

DEVELOPMENT BANK) LOAN APPLICATION FOR BUSINESS INVES TMENT IN TRANSPORTATION OF PASSENGERS (PASSENGER BUS) – TO THE CRDB (COOPERATIVE AND RURAL



NAME AND ADDRESS OF THE APPLICANT:- HOPE TRUST FUND-NGARAMTONI. P.O.BOX 8021 ARUSHA TANZANIA.
E-MAIL:- hope-ngaramtonihivtrust@yahoo.com

CONTACT OF RESPONSIBLE OFFICERS:- (1) MOBILE: 0754 960505
(2) MOBILE: 0754 808246
VILLAGE NEAR EMAOI PRIMARY COURT,
KIMNYAK WARD, ARUSHA DISTRICT, ARUSHA REGION,
TANZANIA.
OFFICE LOCATION: THE OFFICE OF HOPE TRUST FUND IS LOCATED IN
NGARAMTONI

REGISTRATION NO.177063

DATE OF REGISTRATION: 6/2/2008




























EXECUTIVE SUMMARY
In June 2007, the hope trust-fund board members developed its long term (Strategic) plan; one among other things was the question of future sustainability of the organization in terms of continuing to honor its core value to the community in Kimnyak-ward, which is to provide capital (grants) or loans, business training and HIV/AIDS awareness and education through community volunteers to families affected by HIV/AIDS and those who are not effected but living in very poor living condition s (Highly marginalized families). When these families are imparted with business skills (through training) and later given grants/loans to initiate micro businesses or economic activities like chicken rarering they will be able to sustain their lives in terms of food, clothing and even taking their children to school.
In order to be able to fulfill the above objective, the Board members of hope Trust fund declared that by June 2008, Hope Trust Fund should be able to generate, its owns funds locally by suggesting the most viable business undertaking in the area and apply for a loan from any financial institution. After doing some feasibility study, the members of the board come up with consensus that, among many businesses available in Ngaramtoni Area, passenger transportation has reliable and high return on investment. The board decided to put up a business plan for the project and lodge an application for a loan from the cooperative and Rural development Bank (CRDB) credit manager. The proposed amount to be borrowed from CRDB is Tshs. 16,000,000; and amount which will be enough to buy a reconditioned 24 seaters, passenger bus, which will provide transportation services to passengers community daily between Ngaramtoni township to Arusha Town. They had further agreed that 50% of the extend / provide grants / loan to families living with HIV/AIDS and the remaining will be used to repay the loan and part to cater co-ordination, allowances for volunteers and office running expenses. The board also decided that the loan should be repaid within five years (payback period), and the average rate of return (ARR) should not be less than 25% net of tax and depreciation. In order to satisfy the Bank requirements of depositing 25% of the requested loan as equity contribution each board member has to contribute Tshs. 1,000,000 to make a total of Tshs. 4,000,000 equals to 25% of the loan requested. The hope trust fund, board members has realized the plight of the HIV / AIDS victims and they are committed to be part of many institutions who are working with the same problem, specifically in the area of live hood sustainability through income generating programs.



INTRODUCTION
In June 2004 members of Hope Trust Fund recognized the need for sustainable sources of income for families affected by HIV / AIDS within the Ngaramtoni area and Kimnyak-ward at large. This locally based organization sought assistance regarding funding and set-up an organization and start to discuss / share the ideas with other local and foreign NGOs. At this point the Hope Trust Fund was Established consisting of 4 board members and 7 community volunteers assisting the families with medicines and food donations). “HOPE” stands for HIV opportunities program for enterprises was launched in May 2005. Following its initial success and securing further funding, from donors, additional waves of the project are planned on three months interval encompassing different villages in the area. Within the area, some 15% - 20% of the families are believed to have at least family member with HIV /AIDS. When a family member who has been running a business, or any undertaking, which provides a live hood for his / her family dies of HIV / AIDS, the effect on the children and other dependants can be catastrophic.
Basic needs such as food, clothing and education are no longer provided for. If however another family member can be identified who can take over the business, given suitable training and some working capital, the results can be very different, as the profits out of the business can be spend to improve live hood.
The Hope Trust Fund – Ngaramtoni aims at identifying, train and assist such families, enabling them to support children following the death of family members.

THE PROJECT DESCRIPTION
The board members of Hope Trust Fund after a long debate and deep assessments of various types of businesses, which are possible to carry out in Ngaramtoni town-ship, together they agreed to run a passenger transport business (Daladala business) bringing in and out passengers to Ngaramtoni. The Ngaramtoni Township is growing rapidly in terms of its population economic and social activities, attracting a big influx of people from other areas to shift to Ngaramtoni and establish businesses. In the National census of 2002, the Ngaramtoni population stood at about 6,000 adults and about 1200 children who are under 10 years of age. The National population increase rate stood at about 3%, but it is predicted that Ngaramtoni population is increasing at the rate of 5%. The township currently is expanding, following, the government decision to issue new building cites and permits for residential and commercial houses, this move will trigger population growth in the near future. The passengers transport business, appears to be the most feasible and more profitable compared to other businesses. It also has the advantage of minimum supervision and management costs.

PROJECT OBJECTIVES:-
Currently the operations of Hope Trust Fund are constrained by lack of funds to expands its services, by providing more families with grants / loans to initiate income-generating activities for live hood sustainability. Currently the trust is funded by foreign organization called Mondo challenge of U.K, but the foreign NGO is doing it at a very low scale and short-term plan. This project main objective is to sustain the services provided by Hope Trust Fund in the long-term at a larger scale using locally generated funds, out of investments undertaking.

PROJECT MANAGEMENT:
The overall management of the project will be undertaken by the Hope Trust Fund board members. However the Hope Trust co-coordinator will be overall in charge and manager of the project. The project manager will report to the Hope Trust Fund chairman on daily progress of the project. The project will employ one driver and one conductor both to be responsible with operating the passengers transportation activities and report and submit daily revenues to the project manager. The board members will hold monthly review meetings, for the purpose of assessing performance towards anticipated results. The board has final decisions in all matters regarding finance and day to day mode of operation of the project.

MARKET ANALYSIS
Ngaramtoni village township is a growing town which in recent years witnessed an increase in the number of varying economic activities, ranging from retail shops trade, whole sale trade, sawmills workshops, garages, flourmills, restaurants, pharmacy shops, butchers and a huge portion of population engaged in vegetables and fruits selling, second hand clothes vendors, transporters, both passengers and cargo transportation. The Ngaramtoni township has a cow-market which takes place on Thursday and Sunday every week. The government also allowed the expansion of the township by providing land for residents and non-residents to build both residential and commercial buildings.
Due to the above factors, the population of Ngaramtoni township has been bursting each day leading to demand for more social services like transportation, health, derived from the linkage and Arusha town, which is the source of trading stocks, and other social needs like legal, finance services, insurance services, referral health cases etc. The project is targeting more than 95% of Ngaramtoni population about 6,000 people and even the population outside of Ngaramtoni estimated to be not less than 4,000 who has no private transport and they depend on public commercial transport services to trade between Ngaramtoni township and Arusha city.
In this project / business proposal, the market potential is high as the increase in the number of passenger buses, in the area is proportionally very low compared to the rate of population increase encouraged by growing business / economic activities.

COMPETITION AND COMPARATIVE ADVANTAGE:-
Transportation of passengers business like many other businesses will be operated within a competitive environment, with 100% customer sovereignty. The comparative advantage which this project will enjoy will be quality customer care, through good business management skills which the project manager will provide assisted by chairman of the board who is a qualified business administration professional. This will entails re-cruiting qualified and a well behaved driver and conductor; and daily supervision and evaluation.

ANTICIPATED RISKS AND MITIGATION:
The most anticipated risk in this particular investment proposal is road accidents, either caused by the driver or other drivers; the vehicle can also be stolen. In order to avoid 100% loss of the asset / capital, the management or board of Hope Trust decided to have an insurance cover, with an insurance company and monthly premiums will be paid as security for 100% compensation incase of any unforeseen accident which will lead to huge damage or loss of the vehicle.

ECONOMIC JUSTFICATION OF THE PROJECT:
It is anticipated that, the project will contribute largely to the improvement of transport services in the area, as after the loan is repaid, the savings will be used to expand the business by buying additional buses. Apart from improving the transport services in the area, more funds will be available to provide more families with grants / loans for live hood improvement.





HOPE TRUST FUND - NGARAMTONI

BUDGET FOR BUYING A RE-CONDITIONED PASSENGER BUS VEHCLE; TYPE-TOYOTA HIACE – QD 32 – TO CARRY 24 PASSENGERS AT ONCE

S/NO.
ITEM DESCRIPTION
UNIT COST (T.SHS.)
TOTAL COST (TSHS)
1.
PURCHASE OF VEHICLE EX-DUBAI RECONDITIONED TYPE Q 32 (IMPOTRT DUTY INCLUDED
13,000,000
13,000,000
2.
FIXING NEW SEATS
500,000
500,000
3.
REINFORCING BY FIXING ROUND IRON BARS AT THE BOTTOM FRONT AND BACK OF THE VEHICLE



200,000



200,000
4.
MODIFYING THE WINDOWS
116,000
116,000
5.
REPLACING NEW TYRES TO FIT TANZANIA ROADS

500,000

500,000
6.
PROVISION FOR OTHER HIDEN COSTS

500,000

500,000

SUB-TOTAL
ADD PROVISION FOR INFLA

TION EXPEXTED 8%
14,816,000
1,185,280

GRAND TOTAL

16,001,780

TRUST FUND - NGARAMTONI
PASSENGER

CASH FLOW / PROFIT AND LOSS ANALYSIS TRANSPORT BUSINESS

S/NO.
EXPECTED EXPENSES / MONT
T.SHS
EXPECTED REVENUE / MONTH
T. SHS.
1.
2.

3.
4.
5.
6.
7.

8.

9.

INSURANCE COVER PER MONTH
ROAD LIENCENCE PER MONTH
INCOME TAX PER MONTH
T.L.B PER MONTH
DRIVER’S SALARY PER MONTH
VEHICLE SERVICES AND MAINTANANCE / MOTH
PROVISION FOR DEPRECITIATION / MONTH
TOTAL EXPENSES/MONTH


7,500
12,500
25,000
5,000
100,000
200,000
100,000
450,000


900,000










900,000
10.
NET PROFIT / LOSS PER MONTH
EXPECTED NET CASH INFLOW PER ANUM = (450,000 X 12)
(900,000 –

5,400,000 TSHS.
450,000) = TSHS.









ASSUMPTIONS
It is anticipated that cash inflows per annum will remain constant for the first five years, , and the useful life of the vehicle to be 15 years. From year 6 to year 10, cash flows will drop by 10% cash flow year 11 to year 15, cash flows will drop by 20% annually.
The board members of Hope Trust Fund, put 40% as the minimum return on investment.
The bank cost of capital / loan is 27%, and repayment term is 5 years.
Residue / scrap value after 15 years is estimated to be Tshs. 1,00,000.

HOPE TRUST FUND – NGARAMTONI:
PASSENGERS TRANSPORT BUSINESS APPRAISAL
APPRAISAL BY PAY-BACK PERIOD METHOD
NET CASH INFLOWS / ANNUALY – TSHS
YEAR 1 5,400,000
YEAR 2 5,400,000
YEAR 3 5,400,000
YEAR 4 5,400,000
YEAR 5 4,860,000
YEAR 6 4,860,000
YEAR 7 4,860,000
YEAR 8 4,860,000
YEAR 9 4,860,000
YEAR 10 4,860,000
YEAR 11 4,320,000
YEAR 12 4,320,000
YEAR 13 4,320,000
YEAR 14 4,320,000
YEAR 15 4,320,000
TOTAL INFLOW IN 15 YEARS 72,900,000
BASING ON THE ABOVE CASH INFLOWS: PAY – BACK FOR THE PROJECT WILL BE 3 YEARS

.
APPRAISAL BY ACCOUNTING RATE OF RETURN METHOD (ARR) RETURN ON INVESTMENT

FORMULA:- AVERAGE ACCOUNTING PROFIT X 100
(INITIAL OUTLAY + RESDUAL VALUE) / 2

= 4,860,000 X 100
8,500,000
= 57%

HERE RETURN ON INVESTMENT = 57% > THAN THE
REQUIRED RATE OF 40 % HENCE THE PROJECT IS VIABLE

HOPE TRUST FUND – NGARAMTONI
SUMMARY
Using the two methods of business appraisal techniques i.e PAY-BACK METHOD AND ACCOUNTING RATE OF RETURN METHOD (ARR) OR RETURN ON INVESTMENT:- Both methods suggest that the proposed passenger transportation business as proposed by Hope Trust Fund Board members is a profitable and viable business.