|
This format is designed to gather information and assess network support organizations for both comprehensive appraisals and "mini" evaluations. It has a number of possible applications, ranging from appraisals for funding decisions to internal NSO self-assessments. It is currently undergoing testing, and results of the testing will be incorporated into the final document.
(Originally published under the title: "Building Inclusive Financial Systems: Donor Guidelines on Good Practice Microfinance", December 2004)
The Good Practice Guidelines for Funders of Microfinance provide practical guidance for donor staff on how to best interact with, and support, the various actors in microfinance. Through a highly participatory process, including comments from 20 CGAP member donors and 10 other civil society organizations and individuals, the authors sought to balance all views in updating the Good Practice Guidelines.
This Focus Note examines the experience of five pioneering countries--Brazil, India, South Africa, the Philippines, and Kenya--where agent-assisted branchless banking that targets poor customers is already a reality. It introduces the main issues involved in regulating branchless banking, particularly regarding the use of retail agents.
Does microfinance reach the poorest?
Some MFIs are finding ways to team up with existing safety net programs in hopes of making themselves at least indirectly useful to the poorest. Some safety net and grant programs are deliberately providing financial training and information to their clients so that their clients can subsequently link with MFIs. In other words, people who benefit from safety net programs may "graduate" to become full-fledged microfinance clients. This Focus Note discusses two basic models of linkages between MFIs and safety net programs.
Some of the innovations commercial banks need to service poor clients may be found in information and communications technologies (ICTs).This Focus Note addresses the following questions: Can banking technologies, applied innovatively in developing countries, make microfinance profitable for formal financial institutions? Will they reduce costs to such an extent that banks could profitably serve even those whom MFIs have mostly excluded to date, such as very poor and remote rural customers? Will these customers be comfortable using technology?
This Focus Note discusses issues related to foreign exchange rate risk in microfinance. It explains what exchange rate risk is, looks at techniques used by MFIs and investors to manage the risk, and makes recommendations on managing and avoiding risk.
Renewed emphasis on poverty reduction has put rural populations, particularly agricultural households, back in the spotlight of development efforts. Agricultural development programs often include credits for agricultural production, which have renewed the debate about how to provide finance in rural areas. This paper offers a model (agricultural microfinance), for providing financial services to poor, rural farming households, which combines the most relevant and promising features of traditional microfinance, traditional agricultural finance, and other approaches.
Retail financial institutions remain the backbone of financial systems that serve low-income clients. They need complex skills to offer poor people quality financial services on a permanent basis. In most countries, inadequate retail capacity is the main bottleneck to scaling up microfinance. This brief addresses how funding agencies - public donors, international NGOs, private foundations, and investors - can help meet the challenge of developing retail capacity.
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.
Little is known about how consumer protection might apply to financial services for the poor. As commercialization and competition increase, vulnerable borrowers may be more exposed to potentially abusive lenders. Low-income borrowers may be functionally illiterate, first-time consumers, or insufficiently informed about their rights and can be pressured into making poor borrowing decisions. Strategically, enhanced consumer protection measures can be a more constructive alternative to new or lowered interest rate ceilings. This paper discusses two primary approaches to enforcement of such measures - voluntary codes and state regulation - in the context of developing countries.
New technologies are available to help microfinance providers improve efficiency, track operations more accurately, increase transparency, and reach new customers, yet MFIs struggle to select the right technologies and get the most from their investments. This Donor Brief offers guidance on how to ensure microfinance providers follow good investment and management principles when choosing and implementing new technologies.
As the communities affected by the recent devastating tsunami begin to rebuild their lives, microfinance institutions (MFIs) can play a powerful part in the path to recovery. The following guidelines are intended to help MFIs provide the appropriate range of emergency and longer-term assistance to their clients, while helping both MFIs and donors ensure that the ultimate mission of the MFI--to be a sustainable provider of financial services--is not compromised.
CGAP developed and field tested an activity-based costing tool to help MFI managers understand and analyze individual product costs, especially administrative/organizational costs. Once a product's costs are determined, the tool suggests methods for understanding why and how the costs were incurred and how the product contributes (or not) to the overall financial viability of the MFI.
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.
Interest rate ceilings imposed by governments to protect poor people unfortunately often have the opposite effect. Customers do need protection from predatory lending practices and this brief offers other options governments and donors can employ.
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.
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.
Using Microfin 3.0 replaces the 1998 handbook, Business Planning and Financial Modeling for Microfinance Institutions. This new handbook provides detailed guidance on using version 3 of Microfin, the latest version of the Excel-based financial modeling tool specifically designed for microfinance institutions.
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.
This paper explains how an MFI should estimate the interest rate on its loans if the institution wants to become sustainable; how to calculate the effective interest yield on loans; and what different loan and repayment methods are used to determine the true rate of interest income received by an MFI. The paper also discusses evidence that MFI clients are capable of paying high interest rates, concluding that MFIs should charge clients a rate high enough to ensure their own sustainability.
BancoSol, a Bolivian MFI, faced significant financial and management challenges as it underwent a transition from NGO to licensed commercial bank. The publication summarizes an Ohio State University paper by Claudio Gonzalez-Vega, Mark Schreiner, Richard L. Meyer, Jorge Rodriguez, and Sergio Navajas.
Reprint of "Effective Governance for Microfinance Institutions," in Establishing a Microfinance Industry, ed. Craig Churchill (Washington, D.C.: Microfinance Network, 1997). The authors argue that the microfinance industry can achieve effective governance, if MFI boards focus on four specific roles: fiduciary oversight, strategy, supervision, and management development.
Eleven microenterprise finance programs are examined from two perspectives, outreach and financial sustainability. Based on James Fox's summary an in-depth study of the same name authored by Robert Peck Christen, Elisabeth Rhyne, Robert C. Vogel, and Cressida McKean.
| 
