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Market Outlook 2012: Perspectives of Microfinance Association Leaders

by on May 30, 2012  |  posted in Market Outlook Report  |  1 Comment
Priorities and Threats for Microfinance Associations post-Andrah Pradesh SEEP’s Market Outlook of microfinance associations (MFAs) compiles and summarizes insights from 37 associations worldwide. The surveyed associations represent 4,743 microfinance institutions (MFIs) and 70 million clients, with a total collective loan portfolio of approximately US$21 billion.  As a consultant who has worked with individual MFIs in different countries, I enjoyed the opportunity to read and summarize the experiences of the microfinance sector at the country and regional level, and to discover how many of the issues affect the microfinance sector globally. Role of Government.   The majority cited the impact of government on microfinance, including issues with new or modified legislation for microfinance, subsidized lending, or political and economic instability.  In response MFAs are involved in a variety of advocacy and public awareness activities, from consulting with governments on legislation to organizing conferences for MFIs to sit down with government officials, academics and the public to discuss the positive impacts of microfinance. Competition.  Another common concern is the effect of competition on microfinance institutions and their clients.  Several MFAs are worried that competition will automatically lead to over indebtedness as more institutions compete for the same clients.  MFAs are responding to this threat in several important ways, including mapping exercises and support  for credit information sharing, including credit bureaus.   Most interesting were the comments from MFAs in countries which still see competition as a good thing, since it brings a larger variety of goods and services, and lower prices, to the client.  It is clear that not all respondents think that competition automatically leads to higher credit risk, as shown below. Microfinance Risk Focus on the Client.  A final common theme is (re)focusing on the client.   I found the descriptions of how MFAs are helping their members to focus on clients especially enlightening.  Activities seemed to be divided into two separate themes, and these were pronounced by region.  In Latin America and Asia focusing on the client means market research studies and new product or technology development to expand outreach.   In EECA and Africa focusing on the client means promoting codes of conduct, financial literacy and social performance management.   I would be interested to hear the opinions of others who are focused on these issues as to why there might be this regional difference, and what you think client focus means. Initiatives Risk Trends and Preparedness.  Respondents were also asked to rate the direction of different risks in their countries, and MFIs’ degree of preparedness to manage or mitigate these risks.  Since risk management is my subject matter expertise, this section was the one with which I identified the most.  Read the report to find out how different regions rated the different risks, but the graph below shows the global results. Risk Trends The Market Outlook promises to be a good source of information for MFAs, investors, academics and others who want to know how the microfinance sector is responding to recent challenges.  Associations provide an important link to their member MFIs and MFI clients and have a clear overview of their respective markets. The information that they provided for this report adds texture and context to understand better the crucial market changes, trends, risks, and priorities in the microfinance sector worldwide. Read the Report. _____________________________________________________________________________________________________________________________________ Karla Brom, Risk Management and Corporate Governance Specialist, New York, NY Ms. Brom is an international banking and finance expert with over 20 years of experience. She has been advising and training on the topic of microfinance and financial risk management since 2001, working with ACCION, ATTF/ADA, Banyan Global, CGAP, Citi's Global Microfinance Group, EFSE, EBRD, Grameen Foundation, the IFC, MEDA, Mercy Corps, SEEP and Women's World Banking. She was formerly a Senior VP at Citi, where she has seven years of experience as a risk manager, including oversight of CIti treasury activities in Latin America. Ms. Brom has worked as a consultant to Citi on creating a training partnership between Citi risk management and Women's World Banking to train MFIs in financial risk management. This training has been delivered to 125 MFIs worldwide. She is currently working with ACCION's Center for Financial Inclusion on a tool for MFI board directors to better understand their risk oversight responsibilities. Other recent work was with deposit mobilizing MFIs in the Philippines, Syria and Ethiopia to implement financial risk management reporting, policies and procedures with a focus on liquidity risk and savings. Prior to her work with Citibank, Ms. Brom worked for four years on privatization and financial sector reform in Central and Eastern Europe and for four years as a rating analyst rating structured transactions for Moody's. Ms. Brom received her MA in International Relations with a concentration in business and economic development from the Fletcher School at Tufts University.

1 Comment

bridging loan says:
Jun 06, 2013

Nice answers in replace of the question with real point of view and explaining about that.
short term finance

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