A rough guide for microbankers
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CTA. 1999. A rough guide for microbankers. Spore 80. CTA, Wageningen, The Netherlands.
Permanent link to this item: http://hdl.handle.net/10568/48384
Microfinance is the provision of financial services-not just loans-to people with low incomes in the informal sector, both rural and urban. Be warned: this is not a guide on where to get credit.The importance of microfinance in agriculture was...
Microfinance is the provision of financial services-not just loans-to people with low incomes in the informal sector, both rural and urban. Be warned: this is not a guide on where to get credit. The importance of microfinance in agriculture was underlined by participants at the CTA workshop on poverty reduction (see page 2). It gives farmers and rural entrepreneurs, often women, access to working capital, and a cushion to absorb risk. After twenty years of experimentation, microfinance institutions (MFIs) now form a billion-dollar industry; it is unique because it accomplishes a social mission using commercial tools. There are two major service centres for MFIs: the Consultative Group to Assist the Poorest (CGAP), and the MicroFinance Network (MFN). CGAP is a facilitator group of donor agencies, MFN membership organisation of practitioners. Both reflect the predominance of English and Spanish in microfinance. Most pioneers started in the Caribbean, Latin America, and Asia, partly because of the early interest of American donors and banks which, compared with conservative European and Asian colleagues, are more open to new ideas, such as 'go with the flow', where the ability of a borrower to repay a loan from income is seen as more important than a guarantee ('collateral'). Sharing the learning curve The experiences of MFIs are well documented. One key lesson is the need to charge proper interest rates (or service charge, where interest is not allowed). Charging of 'soft' rates is the main reason for failure in local community and agricultural lending. Such standards and best practice are described in a series of MFN papers on the regulation and supervision of microfinance institutions, and in a set of industrywide tools produced by CGAP to meet the needs of MFI managers. The Appraisal Format, for example, can be obtained freely from the CGAP Website or by mail. The best guide by far for setting up an MFI is The MicroStart Guide. Produced by the Special Unit for Microfinance (SUM) of the UN Development Programme and the UN Capital Development Fund, it is available for h 27.20 ($30) from PACT, and free in full from SUM's Website (http://www.%20undp.org/uncdf/sum/Microstart/%20contents.html). In terms of experience, detail, and reader-friendliness, MicroStart outshines many other starter guides, including the European Union's Methodological Guidelines for Microfinance. Perhaps the most critical, but least understood, elements of a successful MFI are management information systems (MIS). The MIS Handbook, produced by CGAP and available from PACT, gives guidelines for administering and monitoring loan (portfolio) performance, and describes MIS softwares. A superb introduction to more than 50 softwares, many developed in Africa, has been compiled by Crystal Clear Software as a well-linked Website (Crystal Clear Software, PO Box 7463, Kampala, Uganda; fax: +256 41 349274; email: http://www.agricta.org/Sporefirstname.lastname@example.org; Website: http://www.%20verkoyen.org/). The leading software in rural banking is Microbanking System developed by FAO. Open networks The well-oiled microfinance industry has grown up in the age of networking. It is relatively free of fragmentation and absorbs new priorities (gender, environment) with ease. It works hard to bridge language gaps: CGAP works with the French NGO GRET to translate its works into French. (GRET, 213 rue La Fayette, 75010 Paris, France; fax: +33 1 40056110; email: http://www.agricta.org/Spore/spore80/gret@%20gret.org) GRET incidentally, holds the French-language flag high on the Website Pôle Microfinancement (http://www.cirad.fr/mcredit), which has a public database of projects, publications, and experts. Articles of Epargne sans frontières and Pôle Microfinancement present francophone experiences, especially from West and Central Africa, Madagascar, and Southeast Asia (Epargne sans frontières, 32, rue Le Peletier, F-75009 Paris, France; fax: +33 148 009 659; Website: http://www.%20globenet.org/horizon-local). There are links to agencies in savings and insurance, such as the Programme d'appui à la mobilisation de l'épargne dans la francophonie (PAMEF, BP 1236, Cotonou, Benin; fax: +229 330 733; Website: http://www.pamef.org/). One English-language leader here is the World Organisation of Cooperative Savings and Credit Unions, with regional confederations based in Barbados, Kenya, and Asia (WOCCU, fax: +1 608 238 8020; email: http://www.agricta.org/Spore/spore80/mail@%20woccu.org; Website: http://www.agricta.org/Spore/spore80/www.woccu.org). All the leading microfinance players have well-conceived Websites and printed information. The absolute winner is the Virtual Library on Microcredit. It combines a news service with an extensive library of readers documents, case studies, bibliographies, libraries, Internet resour ces, and toolkits that range from overall strategies to actual cue cards for group training sessions for business counsellors. It only exists on the Internet (http://soc-info.soc.%20titech.ac.jp/icm) but, despite the technical problems mentioned in Spore 79, if you are serious enough to want to be a microbanker, you will find your way to the Web. CGAP 1818 H St, NW, Room Q4-023 Washington, DC 20433, USA Fax: +1 202 5223744 Email: http://www.agricta.org/Sporeemail@example.com Website: http://www.worldbank.org/html/cgap MFN - MicroFinance Network 733 15th St NW, Suite 700 Washington, DC 20005, USA Fax: +1 202 3472959 Email: http://www.agricta.org/Sporefirstname.lastname@example.org Website: http://www.bellanet.org/partners/mfn (MFN publications are supplied by ACCION.) ACCION International 120 Beacon St Somerville, MA 02143, USA Fax: +1 617 8769509 Email: http://www.agricta.org/Sporeemail@example.com Website: http://www.accion.org/ (Publications downloaded from the Website receive a 25% discount.) PACT Publications 777 UN Plaza New York, NY 10017, USA Fax: +1 212 6929748 Email: http://www.agricta.org/Sporefirstname.lastname@example.org Website: http://www.pactpub.com/