MicroBanking Standards Project

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MicroBanking Standards Project

• Transparency and Performance Standards in CEE
  and the NIS

Elizabeth Case MicroBanking Standards
Project Microfinance Center 5th Annual
Conference May 16-18, 2002
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Outline

• Why does the Microfinance industry need
  transparency?
• Performance Monitoring and Benchmarking
• The MicroBanking Standards Project international
  benchmarks for MicroFinance Institutions (MFIs)
• Preview of MBB8

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Transparency on Financial Performance is Key

• Clear definitions
• Detailed information
• Flexible reporting
• Availability of peer data

• Standards
• Good data collection tools
• Adapted MIS system
• Willingness to share information

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Who Benefits?

• MFI management
• Current funders
• Prospective funders (i.e., investors, donors,
  lenders)
• Industry as a whole

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Status Transparency in Microfinance is Very Low

• Lack of reporting standards
• Poor quality of information
• Variable MIS systems
• Low incentives for reporting data
• Insufficient rating and benchmarking activities
  (lack of comparable information on a large number
  of MFIs)
• High costs involved in collecting data
• MFIs are not operating at their full potential

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Current Initiatives

• Roundtable discussion on standardization
• Standard financial terms
• Standard ratios
• Standard adjustments for MicroFinance
• Performance Monitoring and Benchmarking Toolkit
• The MicroFinance Information eXchange (MIX)

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Performance Standards

• Why monitor performance?
• Provides a guideline to strengths and weaknesses
• Creates a roadmap to improve performance and
  increase outreach
• Enables to meet reporting requirements
• Increases access to funding

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Advantages of Benchmarking

• Puts performance indicators in context
• Enables mapping of experiences at a local level
• Constitutes a resource for the development of
  capacity-building initiatives

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Future Challenges

• Create standards and evaluation criteria
• Create appropriate data gathering tools
• Focus on value-added of transparency to the MFIs
• Assist MFIs in cost-effective evaluations
• Increase rating and benchmarking activities

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The MicroBanking Standards Project
International Benchmarks

• Collects financial data and tracks performance of
  more than 150 MFIs around the world to create
  standards of performance
• Provides individual feedback to participants on
  over 20 indicators (outreach, portfolio
  management, overall financial performance,
  efficiency, productivity, etc.) in Financial
  Performance Reports
• Disseminates results bi-annually by peer groups
  keeping individual data confidential in the
  MicroBanking Bulletin (MBB)
• Supports local networks of MFIs and apex
  organizations in developing national level
  benchmarks

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The Data Flow
 

• Data collection
• Data verification
• Data input
• Data adjustments
• Data validation
• Peer Group creation
• Data analysis

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Standardization Process

• Reclassify the chart of accounts into a common
  format
• Adjust data to ensure apples to apples
  comparison
• Create Peer Groups of similar institutions
• Ex Eastern Europe - Medium
• Total outstanding loan portfolio 1.5m to 10.0m
  USD
• Target high-end and broad markets

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Making the data comparable adjustments

• Inflation
• Cost of funds
• In-kind subsidies
• Donations
• Loan loss reserve

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Peer Group Criteria in the MBB
Peer group criteria
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Selected Peer Groups from MBB7
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Representation from CEE and the NIS in the MBB8

• Albania
• Armenia
• Azerbaijan
• Bosnia Herzegovina
• Bulgaria
• Croatia
• Georgia

• Kazakhstan
• Kyrgyzstan
• Poland
• Romania
• Russia
• Yugoslavia

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Selected Peer Groups from MBB8
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Preview of the MicroBanking Bulletin no. 8
Note Figures may change in the final version of
MBB8.
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Preview of the MicroBanking Bulletin no. 8
Note Figures may change in the final version of
MBB8.
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Preview of the MicroBanking Bulletin no. 8
Note Figures may change in the final version of
MBB8.
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Preview of the MicroBanking Bulletin no. 8
Note Figures may change in the final version of
MBB8.
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Conclusion

• Transparency is Key to Sound Financial
  Performance
• Improvements in data collection
• Improvements in data quality
• Standardization
• Benchmarking
• Benchmarking is an extension of performance
  monitoring, and national and regional networks
  have a key role to play in increasing quality and
  validity of benchmarking activities

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The Tools

• For MFIs
• Excel Model for Performance Monitoring
  Performance Monitoring
• Customized Financial Performance Reports (for MBB
  participants)
• For Local Networks/ Apex
• Performance Monitoring and Benchmarking Toolkit
• For Industry
• MicroBanking Bulletin Peer Group Statistics and
  future on-line database

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Performance Monitoring and Benchmarking Toolkit

• Suggested formats for financial statements,
  questionnaire
• Software (based on Microsoft Access)
• Manual
• MicroBanking Bulletin peer group data

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In-line with Microfinance Best Practices

• Adjustments (inflation cost of funds in-kind
  subsidies donations loan loss reserve)
• In line with CGAP minimum disclosure requirements
• Will be updated regularly to reflect industry
  standards (terminology, definitions)

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Performance Monitoring Benchmarking Overview
of MBB Database

• Input general and financial information
• Apply adjustments (automated)
• Create peer groups
• Produce reports

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MBB Toolkit Database General Information

• Input statistics about the MFI
• Region of operation
• Date created
• Products offered
• Target market
• Staff
• Clients, etc.

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MBB Toolkit Database Financial Data

• Input financial data from financial statements
  reported by the MFI
• Apply standard adjustments

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MBB Toolkit Database Reports

• Provide feedback through comparative reports

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MBB Toolkit Database Programs

• Create benchmarks at a local level

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Target User for the Database Networks of MFIs
who want to help their members improve their
financial performance

• Create standards at the regional level
• Provide feedback to members
• Exchange data with MBB

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For more information

• Contact us at www.microbanking-mbb.org
• or write to mbb_at_microbanking-mbb.org