LIDA VARDANIA SENIOR INVESTMENT OFFICER Microfinance –A Risky Business? 1. - презентация

1 LIDA VARDANIA SENIOR INVESTMENT OFFICER Microfinance –A Risky Business? 1

2 o o New reality for microfinance? Was it always a risky business or did it become risky now? o o Untapped markets vs markets near saturation o o What are the main challenges MFIs are facing and how to address them? o o How do MFIs respond to new reality? o o Can MFIs and, as a result, clients benefit from this challenging stage of development of microfinance sector? 2

3 Challenges vs Responses from MFIs Challenge on a sector level: o o Finding place on saturated market Challenge on an MFI level: o o Finding right balance between risk and efficiency Most common responses to those challenges: o o To decrease time allocated to loan disbursement, often we see weaker o o Underwriting standards o o Internal control systems 3

4 Check list for underwriting standards o o What should be the focus while analyzing the clientcharacter/financials? o o Are the loan analysis forms used adequate? Do/should they differ by source of income, loan size etc? o o Which financial statements are prepared and analyzed? o o What are taken on the income/expense side? Should the household be analyzed? o o How the information should be gathered? How to make sure the information collected is of a high quality? Usage of Credit Bureau. 4

5 Check list for underwriting standards o o Are related parties/total exposures tracked? Consolidated? o o Too much focus on guarantors/switch of focus from client business analysis to blindly relying on guarantor o o Analysis of guarantors? Should it be done? o o Are cross checking techniques applied? o o What are the adequate ratios to be used for analysis and defining client eligibility? Should they differ by…? o o Client financial data is not stored in MIS 5

6 Check list for proper control system o o How loans are being approved? Scoring/Credit committee? What is the adequate composition of the committee? o o Post disbursement monitoring o o Quality of questions, are info presented by LO questioned? cross-checked? o o Is staff motivation system adequate 6

7 How to Manage Risks on a sector level Challenge on a sector level: o o Finding place on a saturated market How to address it: o o Know your customer o o enhance quality of customer surveys, customer segmentation o o identify client needs and design products accordingly o o Know your competition o o identification of potential markets, extensive vs intensive expansion o o portfolio diversification o o Fight competition via developing technologies o o alternative delivery channels o o delivering tailor made products o o innovative business models 7