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 dr_mostaq@yahoo.com

THANKS