Microfinance Banana Skins 2008 - Citigroup

C S F I / New York CSFIInvestorsBiggest risksFastest risers1 Management quality 1 Too much funding2 Corporate governance 2 Competition3 Foreign exchange 3 Political interference4 Inappropriate regulation 4 Reputation5 Staffing 5 Staffing6 Too much funding 6 Credit risk7 Political interference 7 Unrealisable expectations8 Managing technology 8 Strategy9 Interest rates 9 Ownership10 Unrealisable expectations 10 Interest ratesInvestors were interested in the control aspects of MFIs – governance, management, staffing - and inbroader issues of competition and political interference. As dollar investors, mostly, they are alsosensitive to foreign exchange risk. One of their sharpest concerns is with competition from otherinvestors: they see excessive funding as both a high and a rising risk. Their relative lack of concernwith issues such as profitability suggests that they are taking a longer term view of the challenges facingthe industry.ObserversBiggest risksFastest risers1 Corporate governance 1 Competition2 Staffing 2 Staffing3 Management quality 3 Ownership4 Transparency 4 Corporate governance5 Inappropriate regulation 5 Political interference6 Interest rates 6 Strategy7 Competition 7 Interest rates8 Cost control 8 Reputation9 Managing technology 9 Too much funding10 Strategy 10 Unrealisable expectationsObservers of the microfinance scene (consultants, academics, regulators, lawyers etc) see the main riskslying with internal control issues: corporate governance, staffing, management, transparency, costcontrol and strategy. They see external risks in inappropriate regulation, pressure on interest rates andrising competition. A growing concern is the rise of political interference and reputational risk,particularly if MFIs fail to deliver on public expectations. They are less concerned than other groupswith the problems posed by excessive funding.10 CSFI / New York CSFI E-mail: info@csfi.org.uk Web: www.csfi.org.uk