managing risk.pdf

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118IndexDonor agenciesin disaster response, 98MFI governance and, 22EEarly warning, 10Ecuadorcredit cooperatives, 105–06repossession rules, 81technology implementations, 106–07Enforcement of loan contract, 5–6External risks, 3, 7FFiduciary responsibility, 23Financial riskin natural disasters, 90sources of, 3–4Finarca (Nicaragua), 83Foreign currency lending, 6Foreign exchange, sources of risk, 6Franklin, Benjamin, 40Fundusz Mikro (Poland), 95–96FUNHAVI (Mexico), See Housing and HabitatFoundation (Mexico)GGates, Bill, 101Globe Telecom, 105Governance, MFIcapacity assessment, 23bdaily supervision and management, 24donor agency investment and, 22importance of, in risk management, 19legal form of institution and, 20microfinance–investment vehicles and, 22nongovernmental organizations, 20organizational flexibility and, 19ownership structure and, 19, 20private investment institutions, 20, 21bregulatory compliance and, 20, 22role of, 19scope, 19transition for-profit structure, 22See also board of directorsGovernment-subsidized loans, 45Grace periods, 6Guarantee funds, 5Guatemala, housing microfinance, 69HHealth insurance, 53Honduras, 4–5, 70Housing and Habitat Foundation (Mexico), 70–71, 73Housing microfinancebenefits, 72–73collateral and repayment guarantees, 68costs, 69distinguishing features, 67–68documentation of ownership or residence, 68gender consideration, 73goals, 67government role, 70lessons from successful programs, 72–73market analysis, 73–74MFI capacity for, 69, 74need for, 67program design and implementation, 73–75program examples, 70–72rate of return, 74repayment period, 74subsidies, 69–70technical assistance, 68–69, 71traditional finance versus, 67, 68tIImp-Act Programme, 24bIndia, 104Information managementbiometric technology and, 109board oversight and, 30to diminish market risk, 8–9disaster planning, 92to reduce credit risk, 45risk management strategies, 13sources of risk, 7Insuranceconceptual basis, 53markets, 54, 54fnatural disaster coverage, 92types of, 53See also microinsuranceInterest rateceilings, 46, 47tcompetition among lenders and, 47–48concerns, 41, 43government interventions to reduce, 45–48housing microfinance, 69institutional strategies for lowering, 44–45
Managing Risk and Creating Value with Microfinance119MFI costs and, 41–42, 43, 44b, 48profit component, 43risk-pricing, 42–43sources of financial risk, 3subsidization, 45, 46bInternal risks, 3, 7Inversiones para el Desarrollo (Chile), 82KKatalysis, 96LLeases. See microleasing equipmentLife insurance, 53Limited Objective Financial Society (Mexico), 71–72Liquidity risk, 4Loan loss provisioning, 7, 42Loan portfoliocapitalization rate, 43cash reserves, 4–5, 7government-subsidized loans, 45loan officer incentives to reduce risk in, 45risk assessment, 11–12, 42–43sources of financial risk, 3–4, 7use of personal digital assistants and,106–07, 107fSee also portfolio compositionLong-term loans, sources of risk, 6MMachinery. See microleasing equipmentMacroeconomic policies to reduce interest rates, 48Madagascar, 80Market riskdefinition, 3housing market analysis, 73–74risk management strategies, 8–9sources, 3, 8Membership-based MFIs, 5Mexicohousing microfinance programs, 70–72, 73microinsurance coverage, 59, 61btechnology implementations, 106MiBanco (Peru), 72, 73MiCasa (Peru), 72Microfinance Information Exchange, 12Microfinance institutions, generallyBasel standards, 10costs, 41–42goals, 53governance. See governance, MFIhousing financing. See housing microfinanceimportance of risk management, 3leasing. See microleasing equipmentpotential risks, 3–9risk management system design, 10role in disaster response, 89role in microinsurance, 60types of, differences in risk level among, 5Microfinance–investment vehicles, 22Microfinanzas, 12Microinsuranceclient education in, 53, 55, 59clients’ purchasing decisions, 55community-based, 57consideration of local conditions, 54consumer protection, 59coverage and outcomes, 54, 55tcoverage in Latin America, 59, 60fdelivery models, 57–58, 58tdemand, 56fgood design, 54implementation case examples, 61bin insurance market, 54, 54f, 62MFI role in, 60rationale, 53, 62regulatory issues, 58–59reinsurance and underwriting, 57, 58, 59rural market weather-indexed insurance,56–57, 58–59strategies for increasing access and coverage,60–61, 62supply chain, 55, 56t, 57, 61, 62unique features, 62See also insuranceMicroleasing equipmentadvantages for business, 79–80advantages for MFI, 80–81, 81t, 83collateral, 79community or group leasing, 80deposit requirements, 82disadvantages, 81tequipment damage issues, 82example programs, 82–84financial lease, 79in Latin America, 82maintenance of equipment, 82need for, 79, 84operational lease, 79
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