[email protected] keeping the quality standards in mfis niclaus bergmann acting managing director...

[email protected] www.e-mfp.eu

Keeping the Quality Standards in MFIs

Niclaus Bergmann

Acting Managing Director

Savings Banks Foundation for international Cooperation

Luxembourg, November 2009


Keeping the quality standards in MFI

Savings Banks Foundation for international Cooperation

Founded in 1992 by the German Sparkassen (savings banks) Non-profit provider of technical assistance Portfolio end of 2009: 26 projects in 22 countries Projects mainly funded by German Government (BMZ, KfW,

GTZ), Worldbank and EBRD Supporting retail banks, cooperative bank, MFIs 20 staff in HO in Bonn, Germany 100+ staff in projects



I. Challenges for MFIs

General problems Fast growth Outreach vs. Sustainability Refinancing of loan business Development of new products Growing competition (Legal) environment



Changes in the donor community Shrinking role of ODA and social investors More profit-oriented MIVs (with private investors),

i.e. with less developed social objectives Large funds become available to „good“ or well

known MFIs „Competition“ between (social oriented) donors and

(profit-oriented) MIVs



Global financial (and economic) crisis Clients: problems to repay Reduced remittances Exchange rate risks:

Refinancing in hard currency (USD and EUR) Lending in local currency Exchange rates dropped in many developing countries

during 2009: 15 – 20 % in a few months Repayment of existing refinancing lines becomes very

expensive



Drop in EUR exchange rates in 2009 (Oct. 31, 2008 to Oct. 31, 2009)

Mexico - 15.1 % Bangladesh - 15.2 % Rwanda - 17.9 % Serbia - 9.8 % Armenia - 43.3 % El Salvador - 14.3 % Vietnam - 21.0 %



II. Fields of action for MFIs

Loan Portfolio Improve quality (i.e. reduce PAR) Be more selective Quality of portfolio is more important than

growth/outreach



Cooperation with donors / MIVs Don’t take too much money Be selective with donors / MIVs Control/reduce FX risk (hedge or let donor take

currency risk) Mix of currencies Mix of durations



Risk Management Introduce / Improve risk management

FX risk Interest rate risk Operational risk Counterpart risk

Hire professional staff for risk management Make risk management a priority



Professionalism in banking Efficient workflows and procedures MIS and cost management Internal audit HRM / HRD (training of management and staff) Economies of scale

Cooperation with other MFIs as alternative to growth Setting up service-oriented networks and national MFI

associations



III. Conclusions1. Large MFIs have to develop into professional

(MF-) banks

2. Profitability and social objective are no contradiction

3. Anyway, professional banking without a social objective is not microfinance

Combine banking professionalism and microfinance !



Thank you !

[email protected] keeping the quality standards in mfis niclaus bergmann acting managing director...

Documents