This note is based on MicroSave’s experience in developing risk management policies within its Action Research Partners (ARPs). It underlines a number of aspects that institutions seeking to adopt effective, proactive and integrated risk management must address—oversight shifts, formalising policies of risk management, enhancing scope of risks, proactive anticipation, monitoring and prevention of risks. Strategy, structures, processes and infrastructure are the essential components of risk management process of an MFI, mentions the note. It also suggests integrating process mapping and risk analysis and highlights the role of internal audit in management of risks.
Blog
The Credit-Deposit Ratio – Time for a Re-Think?
The Reserve Bank of India (RBI) issued an advisory note to Pubic Sector Banks (PSBs) for maintaining a Credit to Deposit ratio (CDR) of 60% in rural and semi urban branches continuously to reduce inter-regional imbalances in credit delivery. This note provides a critique of CDR as a yardstick of measuring bank commitments for serving the poor, instead it suggests to develop an alternative measure that calculates credit as per utilisation, which gives a far better picture of credit usage. It also proposes to build enabling environment for utilising the vast banking network in India, which provide unique opportunity to achieve the MDGs.
Microfinance – Meeting The Challenges to Realise the Potential
India has a vast banking network in the world. This note discusses about recent trends in the microfinance sector in India, which places a focus on efficiency, sustainability and need based product diversification. It provides evidence of existing gaps in Indian financial sector in meeting the financial needs of poor people through various studies. This note also gives learning from Indian experience in order to create an inclusive, competitive and vibrant financial system that offers high quality, client-responsive products and services to all sectors of society on a commercial basis.
The MicroSave-India Market-led Financial Services Programme
This note introduces the MicroSave-India programme. It provides an overview of governance, programme focus and about administration and budget of MicroSave’s intervention in India.
A Market-led Revolution – Equity Bank’s Continuing Story
Today Equity Bank is a remarkable institution. But in 1993, the Central Bank of Kenya confirmed that, as Equity Building Society, it was technically insolvent and had poor board supervision and inadequate management. Non-performing loans were 54% of the portfolio, and accumulated losses totalled KSh.33 million against a paid-up capital of KSh.3 million. Equity’s liquidity ratio stood at 5.8%, far below the required 20%.
This paper documents the history of this remarkable institution and assesses some of the lessons that can be learned by others seeking to follow its path.Equity’s progression from what was effectively a small family firm to a high potential organisation on to a high performing and now listed institution was not without challenges and struggles. While the paper provides the details of Equity Bank’s Strategic and Operational History, it mainly focuses on key lessons for those aspiring to follow Equity’s extraordinary trajectory
Teaching Elephants To Tango: Working with Post Banks To Realise Their Full Potential
MicroSave carried out a SWOT/ PEST Analysis on the Tanzania Postal Bank (TPB) and the Kenya Post Office Savings Bank (KPOSB) to explore the possibility of Post Offices offering microfinance services as a value added services to their poor clients. The Post banks’ existing large network of branches gives them indisputable comparative advantage and the potential for linking these to e-banking solutions offers a real possibility of bringing the financial services to the unbanked in poor countries. The publications explores ways by which post banks’ network can support the government and other institutions in making salary and pension payments to people living in remote areas who are otherwise un-served by commercial banks.
The document highlights the comparative advantage of post banks’ networks over shops, garages and bars which are used as E/M-Banking agents. For instance, in some countries, the central bank authorities do not permit such outlets to offer even basic withdrawal service. However, the post banks typically remain subject to restrictive policy environment such as labour laws that limit their ability to follow efficient human resource management and product development practices.
The paper goes ahead in making recommendation that in the future even commercial banks can foray into microfinance and even remittance services. A level playing field between the public and the private sector is called for to offer public choice to the consumers in financial services’ delivery.
Point-wise SWOT/PEST analysis conclusions can be read in this article.