Networking,Training & Technical Cooperation for Microfinance Growth &
Sustainability WORKSHOP
“Micro-Credit Financing and Poverty Alleviation in OIC Member States”
9-10 July, 2007, IstanbulDr. Mostaq Ahmmed
FINCA International-Afghanistan
Introduction-FINCA International
• FINCA has been operating for over 20 years, having been established in 1984, by Dr. John Hatch.
• Dr. John Hatch had conceived a small loan program for low-income farmers that put them in charge. The program allowed them to obtain loans without collateral—their main obstacle to accessing credit—at markup rates they could afford. His program became known as “Village Banking.”
Countries where FINCA Operates
FINCA Currently Operates in 22 Countries Around the Globe
AfricaMalawiUgandaCongo TanzaniaZambia
EurasiaAzerbaijanArmeniaGeorgiaKosovoKyrgyzstanTajikistanUzbekistanRussia
Latin AmericaMexicoEcuadorGuatemalaNicaraguaEl SalvadorHaitiHonduras
Middle EastAfghanistanJordan
Financial and Non-Financial Services offered by FINCA International
Financial Services
• Microcredit• SME Loans• Murabaha Loans• Health Insurance• Life Insurance• Savings
Non-Financial Services
• Health Education• Financial Education• Skills/Vocational Training• Networking with other
NGOs and organizations
FINCA Product and Services
• FINCA Uganda– Microinsurance: FINCA covers the debt of a dead village
bank member, so it does not result in hardship for the family.
• FINCA Azerbaijan– SME Loans: FINCA's product offerings have expanded to
include larger, individual loans, collateralized by office or specialized equipment, vehicles, or property.
• FINCA Malawi– Health Education: FINCA’s network of village banks is
used to provide HIV/AIDS prevention education to clients.
FINCA-Afghanistan Islamic Microfinance Program
• The demand for Islamic banking amongst Afghans led FINCA Afghanistan to create Islamic banking products, ever since opening its doors in 2004.
• Its products were created in consultation with local community leaders and received a fatwa of approval from the famous Islamic Al-Azhar university in Cairo, Egypt.
• In 2006, FINCA introduced a new line of Murabaha products, in response to its evaluation of local market demands.
FINCA’s Interest-Free Loans
• Since all FINCA loans are based on Murabaha principles, FINCA does not charge interest, but a markup rate.
• FINCA does not charge a fee on borrowed money, rather, it charges a profit margin on goods sold to clients, just like a vendor charges a markup on sold goods.
FINCA Afghanistan Statistics
• Clients: 41,213• Village Banks: 5,529• Portfolio: $8,324,142• Average loan size: $329• Staff members: 387• Clients per CO: 187• PAR: 0.6%
FINCA’s Global Statistics
Countries in Operation 22
Active Clients 500,030
Portfolio Outstanding $173,338,572
Average Loan Outstanding
$432
Portfolio at Risk >30 Days
2.8%
Savings Mobilized $17,505,561
• Microfinance's Mission is to Fight Poverty Worldwide by
- Empowering poor people and allowing them to generate income through providing them credit and other financial services
- Creating employment, increasing poor people’s income and thus reducing their vulnerability
• Among the Future Issues of the Sector, a Key Issue is to Continuously Reach Large Number of Poor People in Sustainable Manner
Challenging Issues in Microfinance Sector
Innovation
Funding
Legal Framework
Capacity Building
Outreach
Current ChallengingIssues
A substantial outreach is a guarantee of efficiency that can play a large part in leveraging funds
Top Management
Middle
CONCEPTUAL
HUMAN
TECHNICAL
Relative Skills Needed for Effective Performance
at Different Levels of MFIs Management
First-lineManagement
Management
• Structural Strength
• Institutional Planning and Development
• Working Environment
• Operational Efficiency
• Good Communication and Understanding
• Management Efficiency
Training and Technical Cooperation are Prerequisite for
Microfinance Growth and Sustainability
Summary of Activities & Diagram
Effective circulation of information
Assessment of customers satisfaction
and opinion
+
=
Empowerment of the existent human capital
•Solutions to Poor People Specific Needs•Increased Outreach
Head OfficeManagement Team
Branch OfficesHuman
Resources
Marketing
Communication
Policy & Demand-ledStrategy Definition
Policy & Strategy Implementation +
External Environment
• Money Lenders
• Other MFIs
• Commercial Banks
Targeting
Products delivery
Identification of potential customers
Close answer to customers need for financial services
+
+Dec
entr
aliz
atio
nS
tan
dar
diz
atio
n
Organizational StructureF
ield
Lev
el
Mid
dle
Man
ag
emen
t
Management Team Policy Making, Strategic Planning and Monitoring
Management Team Policy Making, Strategic Planning and Monitoring
Branch Manager
Area A Area B Area C
Credit Officers
Sta
nd
ard
izat
ion
& D
ecen
tral
izat
ion
Dem
ocr
atic
Str
uct
ure
Regional ManagerSupervision, Monitoring & Training
Regional ManagerSupervision, Monitoring & Training
Operations Expansion
Human Resources
Accounts, Audit and Procedure
Standardized Number of Borrowers
Branch Manager Branch Manager
Credit Officers Credit Officers
Field Visits
Marketing & Communication
To
p M
anag
emen
t
MFI’s Products and its Management
Products and Services of Microfinance
Deposit Services
• Voluntary Savings Services• Mandatory Savings Services
Credit Services
• Small Credit• Small Business Credit •Credit for Micro Entreprises
Other Financial Services
• Micro-insurance• Life Insurance • Health Insurance • Loan for Housing,
Education, Health...
Non Financial Services
• Family Health and
Sanitation Education• Financial Education• Micro-entrepreneur Training
Financial Services
To Tailor ‘need-based’ Products, Credit Officers & Branch Staff Should be Empowered to Take into Account Clients Suggestions
and Complaints
Delivery Mechanism
Screening of potential customer by credit officer = socioeconomic survey to ensure borrower’s
repayment capacity and business viability
Loan Disbursement
Repayment Procedure& Follow up
-Weekly instalments-Fixed day, time and place-Limited length -Physical presence ensured by record of attendance-Geographical proximity-Customer service standards
-Physical presence of the borrower-At branch office\borrower’s home-Simple forms
Field Level Decentralization of decision making for customer admission
The Delivery Mechanism of MFIs Products and Services should be Standardized to Ensure Speed and Efficiency According to Poor People
Particular Needs
Key Components of Cost-effective Management Capacity Building
DecentralizationDecentralization
Organizational structureOrganizational structure
On the job training On the job training
Close communicationClose communication
StandardizationStandardization
Working manual, written guidebookWorking manual, written guidebook
Human capital empowermentHuman capital empowerment Marketing tools Marketing tools
Need Based Training
To Institutional Culture
To Job Skills and Aptitudes
For new staff members:on-the-job training
• About the institution’s strategy and operations
• About the MFI’s values and issues (particularly client focus)
On an ongoing basis
•To their general role and daily duties through ‘on-the-job training’ in practical work situation with a close supervision from an experienced employee
• To customer service standards (how to create an environment where client feel comfortable voicing his opinion, suggestions and apprehension)
• To marketing techniques to assess customer satisfaction and needs
• To help customers improve their business
Training Tools
-Guidebook
-Training Manuels
-Operations Manuels
-Interactive courses
-Field Training
-Discussions…
Training Tools
-Guidebook
-Training Manuels
-Operations Manuels
-Interactive courses
-Field Training
-Discussions…
Training Content for MF Capacity Building
Microfinance Operations 1. Marketing Strategy and Microfinance Clients Targeting Methodology
2. Microfinance Products, Services and Lending Procedures
3. Microfinance Lending Methodology: Individual and Group Lending
4. Microfinance Islamic Lending Methodology
5. Institutional Business Planning for Microfinance Program
6. Financial Planning & Analysis
7. Savings and Credit Management
8. Program Operational Policies and Procedures
9. Accounting and Record Keeping
10. Auditing for Microfinance Operation
11. Management Information System
12. Branch Manager Leadership Training: Managing, Controlling, and Reporting Tools
13. Detection of Fraud and Internal Control
14. Monitoring and Supervision System
15. Delinquencies and its Management
Microfinance Training & Capacity Building Methods16. Microfinance Training Methodology and How to Build Efficient Workforce?
17. Staff Motivation & Built in Cost effective Training Component
18. Human Resource Planning and Development
19. Good Governance
Microfinance Operations 1. Marketing Strategy and Microfinance Clients Targeting Methodology
2. Microfinance Products, Services and Lending Procedures
3. Microfinance Lending Methodology: Individual and Group Lending
4. Microfinance Islamic Lending Methodology
5. Institutional Business Planning for Microfinance Program
6. Financial Planning & Analysis
7. Savings and Credit Management
8. Program Operational Policies and Procedures
9. Accounting and Record Keeping
10. Auditing for Microfinance Operation
11. Management Information System
12. Branch Manager Leadership Training: Managing, Controlling, and Reporting Tools
13. Detection of Fraud and Internal Control
14. Monitoring and Supervision System
15. Delinquencies and its Management
Microfinance Training & Capacity Building Methods16. Microfinance Training Methodology and How to Build Efficient Workforce?
17. Staff Motivation & Built in Cost effective Training Component
18. Human Resource Planning and Development
19. Good Governance
Technical Cooperation for Growth & Sustainability
Creating Apex Funding Body and Ressources
Mobilisation for OIC Member State
Knowledge Hub and Resource Centre
Training Institute
Exchange Expertise and Best Practices
Technology Transformation
Green Fielding
Friendly and Flexible Regulation for Microfinance Practices
Why MFIs Need Micro Finance Training and Technical Support ?
• Maximizing Effeciency • To Standardise and Improve its Services Through the Need
Basis Training • Maximum Utilisation of Manpower• To Integrate its Exparts and Training Tools to Managing
Growth • To Develop a Cost-effective and User-friendly Methodology
for Training and the Use of Technology• To Develop the Professional Expertise Through
– Sharing best practices and – Increasing the opportunities to network on a regular basis– Evaluating training activities systematically– Developing a built in training process for human resourse
development
How Effective Training Can Maximise Efficiency & Reduce Costs ?
Decentralization of Decision Making
- Front line agents empowerment in the process of field decision making
- Procedure standardization and fund management decentralization
- Duties and scope for initiative\decision making clearly explained at each hierarchical level
Optimization of Existent Resources
- More responsibilities given to front line agents along with loan repayment task (average client and portfolio per credit officer)
- Vehicle for collecting client information and conveying MFI image during group meetings
- Close watch over staff turnover rate to prevent departures and related costs
- Skills and practice accumulation of staff member thanks to on going training allow promotion
Non Conventional Staff Recruitment
- Adapted personal competences ( neither too low, nor too high)
- Group interviews and situation tests allowing savings in time and cost reduction
- On-the-job training in practical work situation
- Close supervision from colleagues and immediate superior
For More Information Please ContactDr. Mostaq AhmmedFINCA Afghanistan
Microfinance and Development Expert [email protected]
THANKS