Microfinance Banana Skins 2008 - Citigroup

C S F I / New York CSFIWho said whatPractitionersBiggest1 Competition 1 Competition2 Cost control 2 Mission drift3 Inappropriate regulation 3 Credit riskFastest risers4 Interest rates 4 Political interference5 Credit risk 5 Staffing6 Mission drift 6 Strategy7 Management quality 7 Managing technology8 Managing technology 8 Ownership9 Staffing 9 Interest rates10 Corporate governance 10 Management qualityThe biggest concern for microfinance practitioners is the rise of competition from new entrants, whichthey see putting downward pressure on standards and squeezing margins. Key managementchallenges of cost control, credit risk and technology are also high on the list, as are people issues suchas management quality and staffing. Inappropriate regulation is a widespread concern. A fast-risingrisk for this group is mission drift: the danger that MFIs will be driven away from their original socialpurposes by commercial interests.AnalystsBiggestFastest risers1 Corporate governance 1 Competition2 Management quality 2 Too much funding3 Interest rates 3 Interest rates4 Managing technology 4 Unrealisable expectations5 Unrealisable expectations 5 Natural catastrophes6 Mission drift 6 Strategy7 Inappropriate regulation 7 Staffing8 Ownership 8 Managing technology9 Strategy 9 Mission drift10 Transparency 10 Foreign exchangeAnalysts of the microfinance sector focused on the control aspects of MFIs: the quality of management,corporate governance, strategy and transparency. They see the biggest risks in the rise of competition -both among MFIs and investors – and a greater exposure to interest rate pressure. Generally, theirinterest lies with the longer term issues of MFI development such as regulation and ownership ratherthan with short term issues of credit risk and profitability. They were particularly concerned thatmicrofinance might not be able to meet high investor expectations.CSFI / New York CSFI E-mail: info@csfi.org.uk Web: www.csfi.org.uk 9