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CGAP and Citi have sponsored the 'Microfinance Banana Skins 2008' survey of leading industry opinion.
According to this new survey of the risks facing microfinance, completed at a
time when the sector is undergoing profound changes, the greatest threats to the
business lie in poor management and inadequate corporate governance.
Across the world, new measures are being
introduced to combat money laundering and the financing of terrorism. Once the concern primarily of banks, governments have expanded regulations and requirements for compliance since the late 1990s. Now all financial service providers, including those working with lowincome communities, are--or will--be affected.1 As a result, the new international framework and national measures for anti-money laundering (AML) and combating the financing of terrorism (CFT) could have far-reaching effects.
MFI portfolio reviews are critical for management, as well as regulators and the growing number of commercial investors in microfinance. External audits, ratings, and evaluations generally fail to accurately quantify the primary risk facing investors?misrepresentation of microcredit portfolio quality. This loan portfolio review tool evaluates the accuracy of reported levels of repayment and the extent to which the MFI employs sound loan management practices. It has three, gradually deepening, levels of review that give increasing degrees of certainty about the quality of loan portfolios, regardless of how they are reported. It is flexible enough for different uses and requirements for confidence in reported loan portfolio quality, and does not require specialized audit or financial analysis skills.
CGAP maintains the Microfinance Gateway as a public forum and information exchange platform for the microfinance industry. It includes highlights; reviews of new articles; resource centers on microinsurance, information systems, audits, client targeting; a 15,000-volume searchable library of electronic documents; a consultant database; a jobs listing service; and specialized discussion groups.
The Disclosure Guidelines represent the consensus of CGAP's 28 member donors on MFI financial reporting requirements. The guidelines do not prescribe accounting policies or any particular format for financial reporting. Rather, they indicate the minimum information that should be included in MFI financial reports, regardless of how that information is presented. It reflects revisions based on field testing, which concluded in 2002.
This guideline puts forward standard definitions for selected financial terms, commonly used and subject to confusion, and suggests a standard method of calculating certain financial ratios. The consensus on these terms is the result of a project intitated by Damian von Stauffenberg of MicroRate with Alternative Credit Techniques, CGAP, IDB, M-Cril, MicroBanking Bulletin, PlaNet Finance, the SEEP Network and SEEP Financial Services Working Group, and USAID.
Scoring is a new way to judge the risk of whether the self-employed poor will repay their microcredit debts as promised This paper discusses how scoring works, what microlenders can expect from it, how to use it, and what its implications are for microcredit.
Definition and discussion of some of terms that are often inconsistently used in the collection, analysis, and disclosure of MFI financial information. The glossary is part of a trio of CGAP publications on financial transparency that includes Focus Note No. 22 Resource for Microfinance Assessments, [French PDF] and the CGAP brochure, Focus on Transparency: Building the Infrastructure for a Microfinance Industry.
Knowing and understanding the components that contribute to "transparency" in microfinance is half of the battle. It is also particularly useful to know, with just a few strategic changes, how donor reports can enhance transparency for the whole microfinance sector.
Why do microfinance institutions (MFIs) charge such high interest rates to the poor? This brief gives donors a quick reference to use when answering questions about the seemingly high microcredit interest rates. It also explains how donors can tell if an MFI's rates are too high and suggests what to do.
This update outlines the activities of CGAP and other industry players in the area of financial transparency. This document is part of a trilogy of special reports on financial transparency in microfinance. The other two documents are Financial Transparency: A Glossary of Terms and Focus Note No. 22 Resource Guide to Microfinance Assessments.
This identifies the CGAP mission and its services to the microfinance industry as a whole.
Not only can poor ratios mislead donors, they can also obscure urgent problems from MFI managers until it is too late to reverse them. Many an MFI has died of a repayment cancer that could have been cured if it had been detected and dealt with earlier. Meaningful delinquency monitoring is thus a crucial diagnostic tool for MFI management.
Using examples from the field and an actual MFI (BRAC), the paper explores alternative answers to a series of questions that MFI managers should ask themselves regarding the allocation of costs and assets among cost centers and the impact of cost allocation on the financial statements of multi-service MFIs.
Volume 1 is geared towards the clients of MFI external audits: boards of directors and managers of MFIs, donors, creditors, and investors. It reviews the difference between internal and external audits, details specific audit issues associated with MFI loan portfolios, and provides concrete suggestions on how to commission an external audit, including writing the terms of reference and selecting the auditor. Volume 2 is geared towards external auditors, furnishing an overview of the microfinance industry for auditors unfamiliar with these financial institutions, and guidance on a range of audit issues specific to MFIs. to refer their auditors to the External Audit handbook.
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