TY  - BOOK
AU  - Ledgerwood, Joanna
TI  - Microfinance handbook : an institutional and financial perspective 
SN  - 0821343068
U1  - 332.1 
PY  - 2000///
CY  - Washington D.C.
PB  - World Bank
KW  - Financial institutions
N1  - CONTENTS Foreword  xv Preface  xvi Introduction1 PART I-ISSUES TO CONSIDER WHEN PROVIDING MICROFINANCE  9 1 Understanding the Country Context 11 Suppliers of Financial Intermediation Services 12 Existing Microfinance Providers 14 What Role Do Donors Play in Microfinance? 16 Financial Sector Policies and Legal Enforcement 17 Interest Rate Policies 18 Government Mandates for Sectoral Credit Allocations 19 Legal Enforcement of Financial Contracts 19 Financial Sector Regulation and Supervision 20 When Should MFIs Be Subject to Regulation?21 Considerations When Regulating MFIs23 Country Approaches to Regulating MFIs25 Economic and Social Policy Environment26 Economic and Political Stability26 Poverty Levels28 Investment in Infrastructure and Human Resource Development  28 Government View of the Microenterprise Sector29 Appendix 1. Risks in the Microfinance Industry30 Sources and Further Reading31 2 The Target Market and Impact Analysis 33 Objectives of the Microfinance Institution33 Direct and Indirect Targeting 34 The Importance of Adequate Cash Flow and the Capacity to Service Debt 35 Minimal Equity Requirement36 Moral Hazard36 Market Size36 Identifying the Target Market37 Characteristics of the Population Group37 Types of Microenterprises42 Impact Analysis46 Kinds of Impacts47 What Kinds of Impacts Have We Seen with Microfinance?48 Impact Proxies49 Client-Oriented Impact Analysis49 When Should Impact Be Assessed?52 Methods of Impact Assessment53 Fundamental Characteristics of Qualitative Approaches53 Fundamental Characteristics of Quantitative Approaches54 Comparisons of Quantitative and Qualitative Approaches56 Integrating Methodologies56 The Choice of Unit of Analysis56 Appendix 1. Quantitative Impact Assessment58 Sources and Further Reading59 3 Products and Services63 The Systems Framework64 Microfinance Institutions-Minimalist or Integrated?65 Financial Intermediation66 Credit66 Savings71 Insurance74 Credit Cards and Smart Cards74 Payment Services75 Social Intermediation76 Enterprise Development Services78 Social Services81 Appendix I. Microfinance Approaches82 Appendix 2. Matching Enterprise Development Services to Demand86 Sources and Further Reading90 4 The Institution93 The Importance of Institutions93 Attributes of a Good Institution94 The Importance of Partner Institutions94 Institutional Types 97 Formal Financial Institutions97 Semiformal Financial Institutions 101 Informal Financial Providers104 Institutional Growth and Transformation 106 Expansion Within an Existing Structure 106 Creating an Apex Institution 106 Creating a Formal Financial Intermediary 109 Governance and Ownership 110 Accessing Capital Markets 113 Institutional Capacity Building 117 Appendix 1. MFI Operational Review 118 Appendix 2. Manual for Elaboration of a Business Plan 123 Sources and Further Reading 128 PART II-DESIGNING AND MONITORING FINANCIAL PRODUCTS AND SERVICES  131 5 Designing Lending Products 133 Cash Patterns, Loan Terms, and Payment Frequency 133 Client Cash Patterns and Loan Amounts 133 How Does the Loan Term Affect the Borrower's Ability to Repay? 134 Frequency of Loan Payments 136 Working Capital and Fixed Asset Loans 136 Loan Collateral137 Collateral Substitutes137 Alternative Forms of Collateral 138 Loan Pricing  138 Calculating Interest Rates 140 How Do Fees or Service Charges Affect the Borrower and the MFI? 142 Cross-Subsidization of Loans 143 Calculating Effective Rates 143 Estimating the Effective Rate 144 Calculating the Effective Interest Rate with Compulsory Savings or Other Loan Variables 146 Calculating the Effective Interest Rate with Varying Cash Flows 147 How Does the Effective Cost for the Borrower Differ from the Effective Yield to the Lender?  148 Appendix 1. How Can an MFI Set a Sustainable Rate on Its Loans?  149 Appendix 2. Calculating an Effective Interest Rate Using the Internal Rate of Return Method150 Appendix 3. Calculating the Effective Rate with Varying Cash Flows 152 Sources and Further Reading153 6 Designing Savings Products 155 Demand for Savings Services156 Is There an Enabling Environment? 157 Legal Requirements for Offering Voluntary Savings Services 157 Deposit Insurance 158 Does the MFI Have the Necessary Institutional Capacity to Mobilize Savings? 160 Ownership and Governance 160 Organizational Structure 160 Human Resources 161 Marketing162 Infrastructure163 Security and Internal Controls163 Management Information Systems 163 Risk Management and Treasury 163 Sequencing the Introduction of Savings Services 164 Types of Savings Products for Microentrepreneurs 164 Liquid Accounts 165 Semiliquid Accounts 165 Fixed-Term Deposits166 Costs of Mobilizing Voluntary Savings 166 Pricing Savings Products 167 Sources and Further Reading 168 7 Management Information Systems 169 An Overview of Issues Related to Management Information Systems 170 Three Areas of Management Information Systems 171 Accounting Systems 171 Credit and Savings Monitoring Systems 172 Client Impact Tracking Systems 178 Installing a Management Information System 178 Institutional Assessment 178 Configuration 178 Software Modifications 179 Testing179 Data Transfer 179 Training 180 Parallel Operations 180 Ongoing Support and Maintenance 180 Appendix 1. Overview of Commercial Management Information System Software Packages180 Appendix 2. Criteria for Evaluating Loan Tracking Software 183 Sources and Further Reading 183 PART III-MEASURING PERFORMANCE AND MANAGING VIABILITY  185 8 Adjusting Financial Statements 187 Accounting Adjustments 188 Accounting for Loan Losses 188 Accounting for Depreciation of Fixed Assets 192 Accounting for Accrued Interest and Accrued Interest Expense 193 Adjusting for Subsidies and Inflation 194 Accounting for Subsidies195 Accounting for Inflation 197 Restating Financial Statements in Constant Currency Terms 199 Appendix 1. Sample Financial Statements Adjusted for Subsidies200 Appendix 2. Sample Financial Statements Adjusted for Inflation202 Sources and Further Reading204 9 Performance Indicators 205 Portfolio Quality  206 Repayment Rates206 Portfolio Quality Ratios207 Loan Loss Ratios211 Productivity and Efficiency Ratios212 Productivity Ratios212 Efficiency Ratios213 Financial Viability215 Financial Spread  216 Two Levels of Self-Sufficiency216 Subsidy Dependence Index218 Profitability Ratios 220 Return on Assets Ratio221 Return on Business Ratio222 Return on Equity Ratio223 Leverage and Capital Adequacy 223 Leverage  224 Capital Adequacy Standards224 Scale and Depth of Outreach Indicators225 Performance Standards and Variations227 Appendix 1. Sample Balance Sheet233 Appendix 2. Sample Income Statement234 Appendix 3. Sample Portfolio Report 235 Appendix 4. Adjusted Sample Financial Statements (Combined)236 Appendix 5. Analyzing an MFI's Return on Assets238 Sources and Further Reading241 10 Performance Management 243 Delinquency Management243 The Effect of Delinquency on an MFI's Profitability244 Controlling Delinquency245 Rescheduling or Refinancing Loans246 Productivity and Efficiency Management248 Improving Staff Productivity248 Managing Costs251 Risk Management254 Asset and Liability Management254 Operating Risk Management258 Appendix 1. Gap Analysis260 Sources and Further Reading261 GLOSSARY  263 INDEX  271
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