Managing Risk and Creating Value with Microfinance

Mike Goldberg

Description

'Managing Risk and Creating Value with Microfinance' brings together the latest information on microfinance institutional sustainability from leading international experts and microfinance practitioners in four Latin American countries. Each chapter focuses one topic: risk management; good governance; interest rates; microinsurance; housing microfinance; microleasing; disaster preparedness; or new technologies.
The papers in the book are the result of a series of meetings financed by the United Kingdom's Department for International Development and supported by the World Bank's Global Development Learning Network. The Bank engaged practitioners in these four countries in response to a movement in some South American governments to impose policies and practices that would, in the long run, reduce the microfinance institutions' (MFIs') sustainability. The meetings were designed to strengthen MFIs by disseminating innovative approaches in the above eight areas, promoting a South-South dialogue, encouraging greater ties between these MFIs, and highlighting the Bank's ability to mobilize international experts and local practitioners. The discussions took place between 2006 and 2008.
'Managing Risk and Creating Value with Microfinance' covers risk management topics such as risk management systems, good governance, interest rates, and microinsurance. The authors present information on new product development and efficient delivery methodologies including housing microfinance, microleasing, disaster preparedness, and new technologies. A Web site (www.dgroups.org) provided a forum for further discussion and knowledge sharing.
'Managing Risk and Creating Value with Microfinance' is intended for MFI board members, managers, and staff, students and professors of microfinance, and government regulators and supervisors.

Sujets

• Microfinance
• Risk management
• Good governance
• Interest rate
• Technology
• Emergency management
• Microinsurance
• Micro-enterprise

Informations

• Publié par: world-bank-publications
• Publié le: 21 avril 2010
• Nombre de lectures: 34
• EAN13: 9780821382356
• Langue: English
• Poids de l'ouvrage: 1 Mo

Extrait

MANAGING RISK
AND CREATING
VALUE WITH
MICROFINANCEManaging Risk and Creating Value with Microf nance is available as an interactive textbook
at http://www.worldbank.org/pdt. T e electronic version allows communities of practice,
colleagues working in sectors and regions, and students and teachers to share notes and
related materials for an enhanced, multimedia learning and knowledge-exchange experience.Managing Risk and Creating Value with Microfinance iii
MANAGING RISK
AND CREATING
VALUE WITH
MICROFINANCE
Mike Goldberg and Eric Palladini
WASHINGTON, D.C.© 2010 The Interna onal Bank for Reconstruc on and Development / The World Bank
1818 H Street NW
Washington DC 20433
Telephone: [phone]
Internet: www.worldbank.org
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All rights reserved
1 2 3 4 13 12 11 10

This volume is a product of the sta ff of the Interna onal Bank for Reconstruc on and Development / The World Bank.
The fi ndings, interpreta ons, and conclusions expressed in this volume do not necessarily refl ect the views of the
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All other queries on rights and licenses, including subsidiary rights, should be addressed to the O ffi ce of the Publisher,
The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: [phone]; e-mail: [e-mail].
ISBN: 978-0-8213-8228-8
eISBN: 978-0-8213-8235-6
DOI: 10.1596/978-0-8213-8228-8
Library of Congress Cataloging-in-Publica on Data
Goldberg, Mike, 1956-
Managing risk and crea ng value with microfi nance / by Mike Goldberg and Eric Palladini.
p. cm.
Includes index.
ISBN 978-0-8213-8228-8 -- ISBN 978-0-8213-8235-6 (electronic)
1. Microfi nance. 2. Risk management. I. Palladini, Eric, 1956- II. Title.
HG178.3.G65 2010
332--dc22
2009052150
Cover photos: © Curt Carnemark and Julio Pantoja/The World Bank; Larry Mayorga/Pic onary Studio (top le and
center)
Book/book cover design: Larry Mayorga/Pic onary Studio
?????????L????????????Managing Risk and Creating Value with Microfinance v
Contents
Preface ix
Acknowledgments xi
About the Authors and Contributors xiii
Abbrevia ons xvii
1 Risk Management: Preparing for the Unexpected 1
Risk Categories 3
Management of the Biggest Risks 5
Producer Risks 7
Addi onal Risks for MFIs with Rural Por olios 8
Development of a Risk Management System 10
Steps in Risk Management 11
Approaches to Managing Risks 13
2 Good Governance: Managing Internal Risk 17
Ownership, Legal Form, and Their Impact on Governance 19
NGOs 20
Private Investors 20
Government 21
External Public En es and Aid Agencies 22
Microfi nance Investment Vehicles 22
MFIs in Transforma on 22
The Board of Directors: Func onal Responsibili es 23
ectors: E ff ec ve Structure 26
The Board of Directors: E ff ec ve Processes 28
ectors: Member Selec on and Par cipa on 32
Summary and Conclusions 35
3 Interest Rates: Paying for Risk 39
Introduc on 41
Interest Rate Se ng 41Are Microfi nance Interest Rates Too High? 43
Lowering Interest Rates at the Ins tu onal Level 44
Lowterest Rates through Government Policy 45
Conclusion 48
4 Microinsurance: An cipa ng Client Risks 51
Insurance Products and Low-Income Clients 53
Design of the Product for Low-Income Markets 53
Microinsurance for Rural Clients 56
Delivery of the Product 57
How Does La n America Fare in Microinsurance Coverage? 59
MFIs and the Barriers to Mainstreaming Microinsurance 60
Conclusion 62
5 Progressive Housing Microfi nance: Building One Room at a Time 65
The Housing Microfi nance Approach 67
Ins tu onal Changes 69
Subsidies 69
??????????????????????Contentsvi
The Role of Government and Risk Management 70
Examples from La n America 70
Lessons Learned 72
Designing a New Housing Microfi nance Program 73
6 Microleasing: Overcoming Equipment-Financing Barriers 77
The Basics of Microleasing 79
Advantages of Leasing for Microbusinesses 79
Advantages of Microleasing for the MFI 80
Tax and Regulatory Considera ons with Microleasing 81
Management of Microleasing Risks 82
Use of Microleasing in La n America 82
Recommenda ons for a New Microleasing Program 84
7 Disaster Management: Preparing for the Worst 87
An Unfortunate but Common Story 89
Costs of Disasters 89
Proac ve Approaches and Concrete Responses 91
Conclusion 97
8 New Technologies: Providing a Path to Lower Costs and New Products 101
Introduc on 103
Why Technology Ma ers 103
Mobile Banking 104
Network Systems 105
Remote Data Processing 106
PDAs 106
POS Terminals 107
Biometrics 108
Costs, Risks, and Challenges 109
Conclusion 111
Glossary 115
Index 117
BOXES
1.1 Basel Commi ee: Interna onal Standards and Prac ces for Risk Management 10
1.2 Risk Measurement Systems 13
2.1 Investors as Board Members 21
2.2 Ques ons to Assess the Implica ons of an MFI’s Ownership Structure 23
2.3 The Board and Social Performance Management 24
2.4 Evalua ng Board Performance 25
2.5 Some “Do’s” and “Don’ts” for Boards 27
2.6 Sample Board Mee ng Agenda 29
2.7 A Case Study: The Dominican Integrated Development Ins tute 31
2.8 Responsibili es and Standards of Conduct for Board Members 34
3.1 Microcredit Cost Structure 44
????????????????Managing Risk and Creating Value with Microfinance vii
3.2 E ff ects of Subsidized Interest Rates 46
4.1 The Mechanisms of a Weather-Indexed Insurance System 57
4.2 Mapfre Seguros: Microinsurance in Brazil 61
4.3 FINSOL: Life and Funeral Insurance in Mexico 61
5.1 Can Gender Be a Factor in a Housing Microfi nance Program? 73
6.1 CECAM’s Expanded Menu of Leased Equipment for Rural Producers 80
7.1 Catastrophe Risk DDO 94
7.2 Buro-Tangail Con ngency Fund, Bangladesh 94
7.3 Loan Product Adjustments for Disasters: The Case of the Bangladesh Rural
Advancement Commi ee (BRAC) 95
7.4 Katalysis: Response to Disasters 96
8.1 Minimum Requirements for a POS Device 108
8.2 Regulatory and Policy Guidelines for Branchless Banking 110
FIGURES
3.1 Percentage Components of Real Interest Rates, 2004–05 4