ASSET QUALITY Portfolio Quality No need for concern about large loan • concentration Focus on quality of delinquency management • systems Write-Offs and Write-Off Policy Should fit microcredit terms and experience • Portfolio Classification Treatment of with unconventional form of • System guarantee Productivity of Long Term No change Assets Infrastructure Allowance for low-cost infrastructure suitable • for reaching the poor Management Governance/Management Unconventional owners and sometimes • managers Human Resources Different staff profile, salaries • Importance of incentive systems Controls, Audit Internal audit must take lending methodology • • into account Information Technology Delinquency monitoring focus • Strategic Planning and No change Earnings Budgeting Return on Assets May be higher than the norm • Return on Equity No change Efficiency Administrative expected to be well above • standard commercial banking Indicators and benchmarks specific to • microfinance are needed here Interest Rate Policy Interest well above standard commercial • banking Liquidity Productivity of Current Assets No change Liability Structure May differ substantially from most other banks • Liquidity Ratio No change Cash Flow Projections No change Source: Rhyne (2002) Figure I: Percentage Composition of MFIs by Institution type as at Dec 31st 2000 and Dec 31st 2009 Source: Microfinance Information Exchange (MIX) (2011)
ASSET QUALITY Portfolio Quality • No need for concern about large loan concentration • Focus on quality of delinquency management systems Write-Offs and Write-Off Policy • Should fit microcredit terms and experience Portfolio Classification System • Treatment of with unconventional form of guarantee Productivity of Long Term Assets No change Infrastructure • Allowance for low-cost infrastructure suitable for reaching the poor Management Governance/Management • Unconventional owners and sometimes managers Human Resources • Different staff profile, salaries • Importance of incentive systems Controls, Audit • Internal audit must take lending methodology into account Information Technology • Delinquency monitoring focus Strategic Planning and Budgeting No change Earnings Return on Assets • May be higher than the norm Return on Equity No change Efficiency • Administrative expected to be well above standard commercial banking • Indicators and benchmarks specific to microfinance are needed here Interest Rate Policy • Interest well above standard commercial banking Liquidity Productivity of Current Assets No change Liability Structure • May differ substantially from most other banks Liquidity Ratio No change Cash Flow Projections No change Source: Rhyne (2002) Figure I: Percentage Composition of MFIs by Institution type as at Dec 31st 2000 and Dec 31st 2009 Source: Microfinance Information Exchange (MIX) (2011)
Sherry%20Katwaroo.docx