Microfinance Banana Skins 2008 - Citigroup

C S F I / New York CSFIawareness awareness of of competition and and market market developments”. A bank A bank regulator regulator said said that thatMFIs MFIs “lack “lack strategic strategic imperatives”.Some Some respondents felt felt that that MFIs MFIs were were too too hooked hooked on ideology on ideology when when it came it came to tostrategic strategic planning, planning, and and should should be more be more open-minded. Elissa Elissa McCarter, McCarter, director director of ofdevelopment finance finance at CHF at CHF International in the in US, the US, said said that that microfinance had hadaccumulated a very a very solid solid base base of of experience and and had had much much to applaud, to applaud, but “there but “there is islikely likely ‘more ‘more than than one one truth’…as truth’…as it develops it develops further!” further!” A Swiss A Swiss investor investor said said that that“those “those MFIs MFIs which which position position themselves in a in mature a mature market market will will be able be able to handle to handle the thechallenges challenges successfully”.17. 17. OwnershipAs more As more MFIs MFIs make make the transition the transition from from NGO-type NGO-type organisations to to commercialcompanies, potentially destabilising tensions tensions are arising are arising among among the different the different types types of ofowner. owner. These These surround surround key key issues issues such such as the as nature the nature of the of MFI’s the MFI’s mission, mission, the role the roleof profit, profit, whether whether to remain to remain local local or broaden or broaden out etc... out etc... Some Some respondents saw saw the theproblem problem in terms in terms of founding of founding owners owners trying trying to cling to cling to their to their original original missions, missions, others othersin terms in terms of new of new realities realities forcing forcing MFIs MFIs to move to move with with the times. the times. This This was was seen seen as a as arising rising problem problem in all in regions. all regions.Ira Ira Lieberman, president president of Lipam of Lipam International and and advisor an advisor to to microfinancefunds, funds, said said that that “new “new investors investors push push the market the market too fast”. too fast”. Yet Yet Deborah Deborah Drake, Drake, vicepresidenpresidentof ACCION of ACCION International, said said that that “’founder “’founder syndrome’ continues continues to tovice-plague plague the NGOs the NGOs transforming into into regulated regulated MFIs”. MFIs”. Another Another respondent said said that that“multi-stakeholder MFIs MFIs are still are still difficult”. difficult”.Some Some respondents saw saw the ownership the ownership issue issue in terms in terms of a of regulatory a regulatory bias bias which which forces forcesnew new ownership ownership structures structures on MFIs on MFIs or makes or makes it difficult it difficult for them for them to transform to transformthemselves into into regulated regulated entities. entities. Bob Bob Annibale, Annibale, global global director director of Citi of CitiMicrofinance, took took issue issue with with the view the view that that MFIs MFIs needed needed to transform to transform themselvesinto into for-profit for-profit banks banks in order in order to succeed. to succeed. In In Bangladesh it was it was BRAC BRAC the NGO, the NGO, not notBRAC BRAC Bank, Bank, that that completed completed an AAA an AAA rated rated securitisation “because “because of the of quality the quality of ofits its management”.18. 18. Back Back office operationsMany Many MFIs MFIs lack lack the the strong strong management and and accounting systems systems which which are arenecessary necessary to control to control risk risk and keep and keep costs costs down, down, particularly as they as they expand expand in size in size and andcomplexity. In general, In general, this this was was seen seen to be to a be middle a middle level level risk, risk, but not but on not the on rise the riseowing owing to the to amount the amount of work of work that that is being is being put into put into it. it.“Neglecting the theback back end…is not not a ahealthy trend” trend”Concerns Concerns focused focused particularly on larger on larger MFIs MFIs which which might might be be overwhelmed by rapid by rapidgrowth growth or which or which put back put back office office upgrading upgrading too low too low on their on their list of list priorities, of priorities, though thoughmany many smaller smaller MFIs MFIs were were also also seen seen to be to be dangerously under-equipped. Howard HowardBrady, Brady, president president and and CEO CEO of MFI of MFI Resources Resources in the in US, the US, said said that that “system “system providers providersare not are doing not doing a very a very good good job of job training of training and and implementing systems, systems, and and MFIs MFIs are arenot willing not willing to pay to the pay costs the costs of a of good a good MIS. MIS. The The result result is systems is systems that that are inferior are inferior and andare held are held together together with with frequent frequent patches patches that that create create more more problems”.Maria Maria Nerissa Nerissa Cochingco, an MF an MF consultant consultant in the in the Philippines, said said that that “as “as the thevolume volume of of transaction increases, increases, systems systems fail to fail adapt to adapt most most of the of time”. the time”. C.O. C.O. Joby, Joby,26 CSFI / New York CSFI E-mail: info@csfi.org.uk Web: www.csfi.org.uk