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Transparency is essential if the microfinance industry is to reach scale. Investors, donors, and most importantly, domestic savers, will only place their funds where they can reliably assess risk and return on the basis of standardized, comparable information. In addition, transparency makes it easier for auditors and supervisors to oversee the safety of the financial system, which in turn gives additional confidence to investors. Institutions that provide financial services also need clear, standardized information to help them determine where they stand in relation to their peers, or on a global basis. MFI managers that can benchmark their performance against other MFIs are better able to improve performance and more interested in doing so.
CGAP is helping to: a) build information infrastructure in the microfinance industry; b) standardize the data that institutions use to conduct financial transactions and report financial performance; and c) build the local capacity to analyze, collect, and report MFI financial information.
Information Systems Services (ISS) and CGAP's Information Systems (IS) Initiatives help MFIs implement high quality information systems that produce accurate, standardized data and that meet the growth objectives of the institution. Projects include funding for MFIs to obtain specialized technology consulting services, an e-marketplace for access to a range of IS products and for information-sharing among MFIs, and consumer reviews of off-the-shelf information systems. CGAP will also foster the availability of products that use industry data standards.
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MFI Audit Information Center is an online resource center offering specialized training materials for auditors, documents for MFIs, and access to discussion groups. The Audit Center also offers a "Help Desk" with detailed answers to common questions from auditors, MFIs and donors.
Multi-Donor Rating Fund is a joint initiative to improve the quality, reliability, and availability of information on the risk and performance of microfinance institutions. It offers co-financing of independent, professional rating and assessment services to MFIs worldwide, and makes the ratings publicly available. It provides partial funding for microfinance institutions by over a dozen qualified rating agencies. In many cases, the information is being disclosed publicly for the first time.
Microfinance Information eXchange (MIX) provides detailed information on both supply (donors/investors) and demand (MFIs) for institutional funding. It features nearly 1000 sortable and comparable MFI financial statements and ratios, ratings reports and audits, information on MFI networks, and terms and conditions of funding from investors and donors. The MIX also publishes the MicroBanking Bulletin (MBB), a benchmarking service that collects and maintains financial and performance data on MFIs worldwide. The MBB provides MFI managers with confidential financial reports, including peer-group benchmarking, and publishes anonymous peer group data semi-annually.
The Financial Transparency Award recognizes excellence in disclosure in annual financial reporting. It highlights best practice disclosure and encourages MFIs to adopt International Financial Reporting Standards (IAS 1, 30 and 32) and the industry-specific Consensus Guidelines on Disclosure for Financial Reporting by MFIs. CGAP is now accepting applications for the 2006 Award. Deadline is September 30, 2006.
Capital Markets Update is produced and edited by CGAP and the Microfinance Information eXchange (the MIX). The newsletter is the
only publication dedicated to microfinance capital markets news, and is distributed to microfinance providers, investors, donors, rating agencies and consultants.
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