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Division 41 Economic Development and Employment Promotion GTZ Microfinance Operations An Update

GTZ Microfinance Operations - Microfinance Gateway - · PDF fileDivision 41 Economic Development and Employment Promotion GTZ Microfinance Operations An Update June 2004

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Page 1: GTZ Microfinance Operations - Microfinance Gateway -  · PDF fileDivision 41 Economic Development and Employment Promotion GTZ Microfinance Operations An Update June 2004

Division 41 Economic Development and Employment Promotion

GTZ Microfinance Operations

An Update

Page 2: GTZ Microfinance Operations - Microfinance Gateway -  · PDF fileDivision 41 Economic Development and Employment Promotion GTZ Microfinance Operations An Update June 2004

Division 41 Economic Development and Employment Promotion

GTZ Microfinance Operations

An Update

June 2004

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Publisher: Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH Postfach 5180, 65726 Eschborn Internet: http://www.gtz.de Division 41 Financial Systems Development [email protected] Author: Rainer Schliwa With contributions from: Gabriela Braun Thorsten Giehler Roland Gross Marie-Luise Haberberger Brigitte Klein Dirk Steinwand Karl Osner Responsible: Rainer Schliwa Layout: Chrystel Yazdani

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Table of Contents

Table of Contents

1. Introduction .................................................................................................... 1

2. Microfinance – approach and conceptual background .............................. 3

2.1 Approach .............................................................................................................3

2.2 Conceptual background.......................................................................................3

3. Products and services................................................................................... 5

3.1 Establishing and assisting microfinance institutions............................................5 3.1.1 GTZ services, benefits to clients..............................................................5 3.1.2 Experience...............................................................................................7

3.2 Vocational training, associations and credit information – services to microfinance institutions ......................................................................................8 3.2.1 GTZ services, benefits to clients..............................................................8 3.2.2 Experience...............................................................................................9

3.3 Regulation and supervision of MFIs ..................................................................10 3.3.1 GTZ services, benefits to clients............................................................10 3.3.2 Experience.............................................................................................12

3.4 Refinancing microfinance institutions ................................................................13 3.4.1 GTZ services, benefits to clients............................................................13 3.4.2 Experience.............................................................................................14

3.5 Linkage..............................................................................................................14 3.5.1 GTZ services, benefits to clients............................................................14 3.5.2 GTZ experience .....................................................................................15

3.6 Mobilising savings .............................................................................................17 3.6.1 GTZ services, benefits to clients............................................................17 3.6.2 GTZ experience .....................................................................................18

4. Conclusions and future orientations.......................................................... 21

4.1 Reviewing the GTZ experience - a few words in conclusion .............................21

4.2 Governments’ agenda .......................................................................................21

4.3. Donors’ agenda .................................................................................................21

4.4 The private sector’s agenda ..............................................................................22

4.5 Development policy relevance – GTZ’s perspective .........................................22

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GTZ Microfinance Operations – An Update

5. Appendix....................................................................................................... 25

5.1 List of Publications.............................................................................................25

5.2 Selected GTZ Microfinance Projects .................................................................32

6. List of Boxes

Box 1 Simultaneous Multilevel Approach

Promotion of Decentralised Financial Institutions (DFI)* in Mali .....................2

Box 2 Microfinance Associations (MFA) – their Role in the Microfinance Industry ...........................................................................................................7

Box 3 Promotion of Small Financial Institutions (ProFI) in Indonesia .......................9

Box 4 Establishing sustainable linkages of the informal Self help Groups with the formal banking systems in India ......................................................13

Box 5 Savings Mobilisation in Thailand ..................................................................14

Box 6 Microbanker® ...............................................................................................16

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1. Introduction

1. Introduction The relationship between a country’s financial sector and its economic development has tasked economic historians and theoreticians and development policy makers alike, although from different perspectives and for different reasons. The 1950s and 1960s were shaped by the need for the reconstruction and development of economies destroyed by war, leading to a concept of financing which centred on the transfer of capital. Consequently, in the devel-opment policy of the 1960s and 1970s, financial sector promotion was regarded in terms of the necessary capital transfer to developing countries. This was expressed primarily in the development banks founded in the 1950s and 1960s. However, from the start of the 1970s, a number of economists recognised that the financial sectors of the developing economies themselves constituted a significant obstacle to development in the way they function and their limitations. Even so, it was not until the late 1980s that discussion broached the role of financial systems in the development process. This discussion led to development policy interest focusing on the functioning of national financial systems and the financial institutions operating within them. This put development cooperation through a complete volte-face, from “financing development” to “developing financing”. Particularly disappointing here was the minimal success of development banks in reaching their target groups and improving the situation of the poor. At the start of the 1980s, German development cooperation began studying the financial institutions of the South to see how financial services and savings and credit products could be made accessible to previously excluded population groups. This was the beginning for microfinance in German development cooperation. The evolution of microfinance was decisively influenced by examples of successful financial institutions organised on a self-help basis, such as Grameen and SEWA, where mobilising savings had proved a key feature. For German development cooperation in the financial sector, the development of the self-help concept and its link with financial self-help (mobilising savings and lending by local financial institutions) quickly became a central feature. This characteristic has remained to this day, forming a sharp distinction between German approaches to microfinance and the approaches of, for instance, US NGOs. Early examples of approaches to develop the financial system based on self-help practices are the financial cooperation project “village savings funds in Dogon, Mali” (1986) and the linkage of banks with self-help groups in south-east Asia (1989). Finally, the diversity of financial institutions in Germany itself - with its commercial banks, savings banks and cooperative banks - has played a decisive role in shaping the role of German development cooperation in the financial sector. For example, the German Association of Savings Banks and Giro Banks (Deutscher Sparkassen und Giroverband, DSGV) organised exchange programmes in the early 1980s for representatives of savings and loan institutions in developing countries. The activities of the German association of cooperative banks (Deutscher Genossenschafts- und Raiffeisenverband, DGRV) in particular

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resulted in the German credit cooperative system becoming involved in international techni-cal discussions, a process which gained new impetus in German development cooperation in the 1990s with the opening up of the former Communist countries. For both types of institutions (savings banks and savings and loan cooperatives), however, there was never any question of simply transferring the organisational forms of German financial institutions to countries in the South and East. Instead, exchange programmes and a process of ongoing dialogue helped identify the conditions for success for these financial institutions in Germany and the partner countries, in order to develop appropriate solutions for the financial sectors of countries in the South and East. As a result, since the 1980s the most important goal of development in the financial sector has been financial institutions which operate sustainably and economically to reach target groups which are poor but economically active. This goal is based on development cooperation building the structure of the financial sectors of developing (and subsequently also transition) countries. All this goes well beyond previously dominant ideas of the primacy of capital transfer to developing countries. Ultimately, the result has been a paradigm shift which has permanently changed the form of development cooperation in the financial sectors of developing and transition nations. The sectoral concept paper1 on financial systems development, published in 1994 by the BMZ, adopted the paradigm shift described above as a conceptual basis for German devel-opment cooperation. In its concept, the paper takes a systematic approach combining the development of financial institutions which meet the needs of the target groups with the promotion of corresponding institutional and statutory environments in the financial sector. This approach is still followed by German development cooperation in the financial sector, and has also been adopted to a large degree by other development cooperation organisations. This conceptual basis is updated periodically (most recently in early 2003) and revised to incorporate latest developments. The GTZ experience in microfinance described in the present brochure - has played a key role in this process.

1 Financial Systems Development – Promotion of Savings and Credit, Federal Ministry for Economic

Cooperation and Development, Bonn, 1994

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2. Microfinance – approach and conceptual background

2. Microfinance – approach and conceptual background

2.1 Approach

GTZ supports microfinance operations in more than 40 countries, combining technical assis-tance to microfinance institutions (MFIs) with financial sector reform. In general, GTZ activities can be divided into two main categories: Technical assistance to MFIs: GTZ assists MFIs in their effort to become financially,

legally and institutionally viable financial intermediaries. GTZ helps create network structures and links between MFIs and the banking sector rather than focusing solely on individual MFIs. GTZ's major policy objectives in this area include assisting MFIs that focus on credit to expand into savings mobilisation, and emphasises the role of financial intermediation in microfinance – mobilising local deposits and member shares as major sources of funding rather than depending on external funding. In addition, poor customers in particular can be helped by offering savings products rather than subsidised lending.

Support to financial sector reform that affects the institutional environment of MFIs: GTZ assists countries and their microfinance supervisory authorities (central banks or government agencies in charge of supervision in the microfinance sector) to develop more effective financial systems through appropriate legislation on prudential regulation and supervision. Several types of institutions and services help to create an environment that is supportive of MFIs, including MFI competence centres, training institutions, consultancy services such as rating services and external auditing services, credit information bureaus and national or regional microfinance associations that work to improve cooperation between MFIs.

2.2 Conceptual background

At GTZ an approach to developing microfinance has emerged which is essentially charac-terised by three basic features: (1) Simultaneous multi-level approach: GTZ advises at the level of microfinance

institutions, at sectoral level and at macroeconomic level. This enables GTZ to confront the issue of ensuring sustainable access to financial services for the target group (as defined within the framework of development policy) wherever the institutional and statutory environment in the financial sector is still weak. As these levels are interdependent, assistance is provided at all three levels simultaneously, although with different degrees of intensity, depending on the situation in each individual country. For this purpose, close consultation and coordination with other donors is essential.

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BOX 1: SIMULTANEOUS MULTILEVEL APPROACH PROMOTION OF DECENTRALISED FINANCIAL INSTITUTIONS (DFI)* IN MALI

The Background

Mali, one of the poorest countries in the world,has experienced a considerable boost to itsmicrofinance sector from the late 1980s. A jointGTZ/World Bank study provided the basis for aNational Strategy on Microfinance, which wasadopted in 1998. This strategy encompassedstrengthening of supervision, capacity building,and the creation of a professional association.The GTZ-project was initiated to support theNational Strategy together with other internationalpartners.

The GTZ contribution Technical assistance to the Ministry of

Economy and Finance to develop andimplement a supervisory framework for DFI. Enabling the Malian Microfinance Professional

Association to improve its performance and itsservices to members Encouraging and organising policy dialogue

seminars for the stakeholders. Supporting the creation of a regional training

centre for DFI .

In addition, the project has supported a networkof about 50 village savings and credit banks in

e regions of San and Djenné in Central Mali. The French title of the project is: Promotion des InstitutionsFinancières Décentralisées

(2) Orientation towards customer needs and the existing institu-tional landscape and the specific requirements (economic, cultural, logistic) for providing microfinance services: as a result of socio-economic and historical-cultural influences both the mode of func-tioning and conditions for sustainable and economical operation of a microfinance institution and the sectoral environment may vary widely from one country to another. GTZ thus does not give preference to any particular type of microfinance institution. Instead, it bases selection of the financial institutions to be advised, or newly established, partly on technical selection criteria, but with special attention to demand and the existing financial institutions.

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(3) Strategic importance of the sec-toral level: While in the mid-1980s, the vast majority of GTZ projects were still concerned solely with establishing and/or assisting microfinance institutions, a growing number of technical cooperation projects today focus on shaping the environment within the microfinance sector. A key factor has become regulation and supervision of microfinance institutions by the banking supervisory agency. GTZ also assists vocational training to promote growing professionalisation of the microfinance system. In light of the banking crisis in the late 1990s, information services in the microfinance sector, e.g. information on defaulting borrowers, are regarded as important facilities minimising risk at sectoral level. An important player in many countries are the newly-emerging professional associations for microfinance institutions. Another question which plays an important role is how microfinance services can be linked better with economic promotion, promotion of SMEs, environmental protection and resource conservation and rural development.

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3. Products and services

3. Products and services The microfinance project portfolio, which has expanded considerably since the mid-1980s, provides GTZ with a substantial reservoir of experience. The goal is to put this to use, so that GTZ services and benefits to clients can be reproduced and made available as GTZ products in different countries. The microfinance product involves the following areas of expertise: (1) establishing and assisting microfinance institutions (2) vocational training, associations and credit information in microfinance systems (3) regulation and supervision of microfinance institutions (including advisory services to

central banks) (4) linking commercial banks and self-help groups for microfinance services (5) refinancing microfinance institutions (6) mobilising savings (7) banking software for microfinance institutions (microbanker®) These areas of expertise and the experience gained in them are presented below.

3.1 Establishing and assisting microfinance institutions

3.1.1 GTZ services, benefits to clients

GTZ promotes individual microfinance institutions and branch networks, and assists with establishing microfinance as a business area in commercial banks. In line with international terminology, GTZ distinguishes between four development models for improved target group orientation on the part of financial institutions: Downscaling: this is generally understood as a strategy for a financial institution to offer financial products to poorer population groups through change processes in its organisation (e.g. by creating separate specific departments) and products. Today, there are very successful examples of downscaling by banks in the microfinance sector, particularly in Asia. GTZ sees this as confirmation of its hypothesis that financial institutions of different types in various market segments and under different forms of ownership can successfully provide financial products for the poor. Upgrading: NGOs or financial self-help organisations can gain market share through institu-tional growth and improving their products and processes, operating alongside formal financial institutions and even outperforming them in both the range and depth of their services and regional coverage. Upgrading NGOs to commercial microfinance service providers is particularly prevalent in Latin America, and is also seen in south-east Europe. The upgrading and commercialisation of microfinance NGOs can lead to a partial withdrawal from serving the market segment of poor target groups due to profitability considerations. In

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practice, cooperation with non-financial service providers in assisting target groups in handling loans or organising group credits also serves to upgrade the target groups.

Linkage: linking banks with self-help groups has contributed to a substantial deepening of the financial sector and improved territorial coverage, particularly in south-east Asia. Linkage banking has become a GTZ trademark. The participating banks have generally been advised on creating group credit services. On the demand side, borrowers learn through training how to handle group credits through self-help approaches. The concept has also proved its value in an adapted form in Africa, where it is currently being implemented through AFRACA (African Rural and Agricultural Credit Association) at various member banks.

Greenfield banking: since the mid-1990s the formation of microfinance banks from scratch has become standard practice, particularly in transition countries. GTZ has not as yet become directly involved in setting up these institutions, as it does not have the relevant instruments (investment, refinancing). There is, however, experience in cooperation with other donors, e.g. the Asian Development Bank, in establishing a rural cooperative system. GTZ applies the following criteria in selecting financial institutions meriting promotion:

quality/suitability of management and operational liability of owners; employee motivation and development-oriented corporate culture; willingness to innovate and accept risk, e.g. in new financial technologies for financial

services to new target groups; customer orientation and proximity; efficient internal organisation, cost awareness and control based on corporate planning

to achieve revenue which covers costs; capital adequacy.

Advisory services to microfinance institutions are normally directed at strategic areas like business planning, product development, human resource strategies, legal advice and ques-tions of refinancing. At the institutional level, banking supervision of microfinance institutions poses heavy demands on management information systems. GTZ helps improve the data processing capacity of MFIs. One benefit of powerful information systems is the ability to monitor port-folio quality and draw conclusions about the suitability of products. As competition grows, cost control becomes increasingly important. Finally, information systems must facilitate effi-cient reporting where, not only supervisory agencies, but also investors may increasingly be targets of such MFI portfolio and earnings information. The goal is to help the financial institutions being advised to improve their capacity and efficiency, particularly by improving the range of financial services they offer, reaching new

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3. Products and services

customer groups with new products and expanding into new regions. Despite GTZ’s growing emphasis on the sectoral level, support to microfinance institutions remains an important service.

3.1.2 Experience

Microfinance means advising institutions with market viability: Despite the conflict between poverty focus and economic sustainability, MFIs have succeeded in the market through long-term strategies, innovative products and customer-oriented processes. This requires an equally long-term, strategically-oriented consultancy concept with quantifiable development goals and market projections. This is consistent with the aim of establishing sustainable microfinance institutions, in contrast with earlier TC practices of only providing temporary financing instruments. The result is that the sustainability of a microfinance institution is established from the start as an integral part of its business plan, or as a clear goal of projects seeking to introduce microfinance activities to existing financial institutions. The supply of funds and resource planning must accordingly be oriented towards the life cycle of the institution, moving away from the focus on the administrative requirements of donor organisations.

Customer needs, competition and strengthening MFIs in markets: MFIs must become more strongly oriented towards customer needs. Rigid conditions for customers and an exclusive focus on punctual and full repayment are no longer relevant today. MFIs are increasingly competing for customers. An MFI must “grow with its customers”, i.e. recognise the needs of its customers and offer corresponding products, if it wants to succeed in the long term. Accordingly, product development and market expansion are key requirements for the growth of a microfinance institution. In advising MFIs, increasing use is made of research, systematic customer surveys and studies on the impact of financial services. In many developing countries we are seeing commercial banks and MFIs coexisting in microfinance markets, despite the fact that the absence of commercial banks from these markets was once the main reason for the emergence of MFIs. Besides forms of cooperation between the two types of institution, there is also frequently competition. Promoting the interrelationship between the microfinance system and the classic banking system is possible, and generally leads to the professionalisation of MFI management and the expansion of MFIs’ (and banks’) products and services. As banks are actively moving into microfinance, advice to microfinance institutions can involve how to establish cooperative links with banks.

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To improve the effect of vocational training consultancy on the competitiveness of the micro-finance sector as a whole, activities are increasingly focusing on consultancy to vocational training institutions. However, vocational training materials (tool kits) dealing with central management issues have proved an important complementary instrument for individual MFIs. To date, these tool kits have dealt with the issues of internal control, marketing, sav-ings mobilisation and liquidity management. Institutional transformation: the growth of MFIs is leading to changes in the structures, corporate culture and staffing of microfinance institutions. Frequently, this is accompanied by a change in corporate form. Customers in urban environments demand financial services simply as customers, with no interest in membership of a cooperative. Increasingly, non-commercial NGOs are also being transformed into commercial microfinance services provid-ers. Common to all these cases is the need for consultancy products which comply with the basic principles of organisational theory (“form follows function”) and can support change processes flexibly, without attempting to implement a rigid organisational model based on external dictates. Ownership of MFIs and the market for MFI investment: the growth and transformation of MFIs have led to the increasing relevance for MFIs of the issue of equity. A number of investors have emerged worldwide, and markets with corresponding services (MFI ratings, audits, investor fora) are duly appearing for them. Firms providing consultancy to MFIs are also being asked to invest temporarily in their client MFIs, in addition to supplying technical assistance.

3.2 Vocational training, associations and credit information – services to microfinance institutions

3.2.1 GTZ services, benefits to clients

Transfer of know-how to individual MFIs is increasingly being supplemented by the establishment of know-how multipliers, with less emphasis on consultancy to individual MFIs. The transfer of know-how is thus aimed at the microfinance sector as a whole, and less at individual MFIs. Consultancy is then directed exclusively at institutions providing services to microfinance institutions, including professional associations in the microfinance system, vocational training institutions and credit rating agencies. Associations primarily need advice on developing strategies and services for their member organisations. In many African countries, microfinance associations are extensively involved in developing strategies for the microfinance sector and in modifying or updating microfinance legislation (see box). In the transition countries they also play an important role in dialogue with policy decision-makers advised by GTZ.

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GTZ advises vocational training institutions for microfinance on curriculum development. At the same time, institutions providing vocational training are given the capability to carry out training needs assessment and develop strategic staff training plans for microfinance institutions. Credit rating and rating agencies are increasingly important institutions, and are being established in a number of countries specifically for the microfinance sector. In some cases credit rating is offered as an important service by the professional microfinance associations, in others it is organised by commercial service providers. The latter is particularly prevalent in Latin America. Through sector studies and assistance to working groups, GTZ pro-vides the necessary backing to the MFI community for such sectoral projects.

BOX 2 : MICROFINANCE ASSOCIATIONS (MFA) – THEIR ROLE IN THE MICROFINANCE INDUSTRY

A series of studies by GTZ on eight microfinance associations in Africa shows that the majority of these still very young institutions make important contributions to the development of the national microfinance sector. These include: exchanging information and networking

between members lobbying, collaborating on the design and

amendment of the statutory and regulatory environments sectoral coordination responsibilities and

donor coordination financial functions, intra-association audits,

assistance with refinancing, credit checks and certification of MFIs developing a vocational profile for

microfinance, coordinating management training for microfinance

A conference in Ghana organised in November 2002 by GTZ and international donors on MFAs came to the following conclusions: development of MFAs is important for sectoral

policy, but a lack of self-financing means it can only be pursued with further injections of donor funds in the medium to long term MFAs should

focus on services which make possible at least cost-covering for MFAs in setting the prevailing country strategy,

donors should give more weight to the existing role of an MFA in a given country promotion of MFAs should give precedence to

development of other sector institutions; no effort should be made to block development of the provision of private services to MFIs.

3.2.2 Experience

Microfinance associations and networks have both a role as private service provid-ers and functions under public law. Experi-ence shows that it is not always possible to offer services to member organisations on a fee-paying basis where these are also offered as free (technical cooperation) ser-vices. Political lobbying is also difficult to define as a fee-paying service, as it also benefits non-members. Given their own financial resources, member organisations in microfinance associations are rarely in a position to provide the associations with an appropriate financial basis for their work. However, MFAs have no other source of income apart from membership fees. In addition, MFIs are still seeking individual technical assistance, competing for this both with each other and with the MFAs. This is a strain on the solidarity of associations and their member MFIs, since associations can only operate on a basis of mutual trust with the individual institutions they represent.

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In several countries MFAs compete with private providers over services to the microfinance sector. Experience shows that an important function for the MFAs can be in quality assurance and brokerage for services. Advisory services to MFAs by the GTZ will take this increasingly into account.

Experience in the transition countries stresses the need for developing and strengthening elements of civil society and building understanding of the microfinance system and the state’s responsibility for this among those responsible for policy. MFAs have taken up this challenge, in the transition countries in particular. The dialogue between the private micro-finance sector and state agencies could build even greater awareness of the country-specific challenges of the microfinance system. The issue of poverty has gained relevance in recent years to an even greater extent in the transition countries than in other regions. The growth in vocational training in microfinance has been considerable in some cases, and has made a strategically important contribution to the full acceptance of microfinance as a separate profession worldwide. Establishment and maintenance of professional standards, a code of ethics and the establishment of vocational training institutions have proved major elements in the system-building approach to promoting the microfinance system favoured by GTZ. Without its own vocational training system, the base of competence established through technical cooperation cannot be maintained in the medium term. As a result, GTZ sees establishing local vocational training capability as being of substantial importance to the independent development of a country’s microfinance system in a way which meets local requirements. The technical autonomy achieved in this way is equivalent to the GTZ’s policy of mobilising local financial resources as the primary basis for supplying capital and refi-nancing MFIs.

3.3 Regulation and supervision of MFIs

3.3.1 GTZ services, benefits to clients

GTZ advises central banks and banking supervisory agencies, and (in some countries) the ministries responsible for supervising microfinance institutions. In principle, there is a distinc-tion between prudential regulation (which relates primarily to securing savings deposits and the general security of the financial sector) and non-prudential regulation, which includes e.g. tax treatment or protecting borrowers. Generally, prudential regulation is justified with refer-ence to the need to protect savings deposits.

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Statutory regulation of microfinance insti-tutions to protect savings deposits and the supervision of these institutions involve substantial costs and effort for both the regulators and the regulated MFIs. The process involves formulating a statutory framework, getting this through the legislature, drafting and implementing provisions, and finally establishing a corresponding technical administration within the central bank or some other government body. There are also significant costs to the MFIs themselves, as this generally requires heavy invest-ment in improved data collection and reporting. These efforts should bear an economically justifiable relationship to the anticipated additional savings with the MFIs made possible by regulation. In addition, it is helpful for development policy to integrate poor target groups into the financial system through savings.

BOX 3: PROMOTION OF SMALL FINANCIAL INSTITUTIONS (PROFI) IN INDONESIA

The Background Indonesia has a unique diversity of more than 8000 MFI. The roots of many of them date back to colonial times. The deregulation of the late 1980s further increased the number of small MFI. The Asian financial crisis in the late 1990s intensified the need for regulation. Additionally, MFIs lack technical and financial support from secondary institutions such as associations or apex bodies to develop human resources and assets for sustainable growth.

The GTZ contribution Assistance to the Ministry of Finance in

developing a national Microfinance Strategy Assistance in the formulation of a special

Microfinance Law Technical support for the establishment of a

deposit insurance scheme for MFI Assistance to the Bank Indonesia in

establishing a risk based supervision of MFI Improvement of the reporting system of the

Balinese village banks (LPD) Direct support to the BPR association East-

Java in developing training materials and consulting services Assistance in the consolidation of the MFIs in

the provinces NTB and NTT

A cost-benefit analysis of this type with corresponding sensitisation and training of government agencies responsible for regulation form the basis for GTZ advisory services on regulation and supervision. The actual technical work can only begin after this process has produced a result which is satisfactory to all parties. The first stage in consultancy is generally a survey or classification of existing microfinance institutions using internationally agreed criteria including corporate form, equity, governance, commercial or non-commercial orientation and the existence of microdeposit taking institutions. Based on this mapping of MFIs, the need for regulation and a form of regulation which is appropriate for the specific national situation are identified, depending on the num-ber of institutions to be regulated (with the associated question of whether the sector is mature enough for regulation), the size of MFIs, their corporate form and the scale of their operations. One basic question is whether the country needs and/or wants specific legislation for regulating microfinance institutions, or whether this can be done by supplementing existing laws.

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GTZ provides assistance in formulating and supplementing laws to regulate MFIs, including the associated provisions for implementation. Various approaches are possible here. First, non-prudential regulations can handle (for example) provisions covering accounting and improved transparency, which can also be agreed between the central bank and an MFI without extensive banking supervisory regulations. Microfinance associations can also achieve a certain measure of non-prudential or self-regulation by providing corresponding quality standards and monitoring the performance of their members. This can also be a preliminary stage to subsequent prudential regulation by the central bank when this is justified by the growth of the sector. The advanced development of microfinance legislation worldwide means that advisory ser-vices are covering more and more specific problems, e.g. the tax treatment of MFIs or the regulation of specific categories of MFIs (such as microdeposit taking institutions). A new field of consultancy that has emerged recently is in the development and implementation of national and sectoral strategies for the microfinance system. Here again, the central bank or finance ministry frequently plays an important coordinating role. With its advisory services on regulation and supervision GTZ is seeking to improve the com-petence and focus of central banks or ministries when performing government functions in the finance sector.

3.3.2 Experience

In many countries, there is still no satisfactory balance between the resources required from the regulated MFIs and the government regulatory agencies, including the preceding legis-latory process, and the current benefits of regulation to the microfinance sector (including savings). Efforts to take into account the plurality of MFIs in the partner countries by adopting a differentiated regulatory approach (“regulating different MFIs differently”) pose considerable problems to practical consultancy. There are, for example, diverging views on the criteria to be applied for minimum capital adequacy of an MFI. Here, GTZ argues for regulation more concerned with activities and scale of business rather than regulation based simply on cor-porate form.

In the field of non-prudential regulation (applying e.g. to business practices, codes of behav-iour and performance monitoring in MFIs), the work of microfinance associations has proved valuable. This includes the introduction of quality standards for member MFIs. While MFAs do not have any formal remit to regulate and supervise, MFAs can still increase their impact with regard to MFI compliance with established rules. Creation of a regulatory framework is linked with sensitising policy decision makers. In several countries regulation is tending towards structuring criteria (e.g. reporting requirements) for MFIs in a way which frequently cannot be implemented in practice (“don’t

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3. Products and services

regulate if you can’t supervise”). As a result, despite major efforts by the donor community, there are still serious problems in defining the appropriate level of regulation and the range of applicability of measures or appropriate treatment of MFIs with a differing need for regulation. At the level of the microfinance institution, newly-established regulatory provisions can impact accounting and book-keeping practices or the entire reporting system as a whole, resulting under certain circumstances in considerable additional needs for staff training and computing capacity at the MFIs. Experience has shown that existing vocational training capacity in a country’s microfinance sector is frequently a prerequisite for effective imple-mentation of a regulatory and supervisory function. Government agencies in many countries are also not yet able to discharge the supervisory responsibilities resulting from regulation in an efficient and effective manner. The reasons for this are both technical (lack of qualification of staff) and due to inadequate resources on the part of the supervisory agencies. As a result, there is still little experience in organising MFI supervision. Supervision based on regular financial reporting (off-site) is less of a problem than effective and useful organisation of on-site supervision of microfinance institutions. The introduction of regulation by the banking supervisory agency can result in greater influ-ence of the state on the microfinance sector as a whole. This may also affect areas which should not be subject to state regulation. In several countries, for example, interest rate ceilings have been reintroduced within the framework of this process in order to avoid the costs from regulation being passed on by MFIs in the form of interest rates. Regulation may have unintended negative consequences. Balanced debate which leaves enough time for all stakeholders’ opinions to be voiced is thus essential.

3.4 Refinancing microfinance institutions

3.4.1 GTZ services, benefits to clients

GTZ assists MFIs in obtaining national and international (multilateral and bilateral) refi-nancing. In doing this it advises for the most part MFI associations or Apex organisations; access criteria, settlement modalities and reporting to the source of financing are key elements of consultancy. Current activities relate mostly to refinancing within the national financial system, including channelling refinancing from international financial cooperation donors to national MFIs. GTZ is currently establishing an advisory service to MFIs for identifying possible investors. The growing interest in microfinance on the part of many banks has also prompted the emergence of a field of consultancy in bank evaluation of MFIs and formulation of cor-responding refinancing terms. Growing integration of microfinance institutions into local and

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international financial markets is expected to lead to further expansion of GTZ activities in advising MFIs on refinancing.

3.4.2 Experience

The integration of MFIs into local financial sectors is universally regarded as a useful alterna-tive to external (international) refinancing under certain circumstances. In various regions – West Africa (Mali, Burkina Faso), Asia and CIS (Moldavia) – GTZ is supporting the refinanc-ing of MFIs by local commercial banks, with significant success. This creates institutional bridges between the microfinance system and the formal finance sector, countering further dichotomisation of the finance sector. Consideration should, however, be given to the useful division of labour between refinancing (in the sense of wholesale finance) and retail finance by MFIs, which should where possible be offered in clearly separate institutional forms. The following experiences have emerged: Commercial banks which channel international refinancing to final borrowers with a

small mark-up can on balance be a distorting competitive influence on MFIs who refinance primarily from local savings, with correspondingly higher refinancing costs.

To be able to improve coordination in channelling external refinancing, refinancing donors and banks, when selecting MFIs, must have more comprehensive information on the evolution of the microfinance system, specifically on sectoral development strategies.

Access criteria and procedures for channelling refinancing to local MFIs should be made transparent, in order to avoid distortion of competition between MFIs.

A functional distinction should be made between public and private sector institutions in terms of channelling refinancing. In principle, public rural development banks are also suitable for GTZ as providers of refinancing for MFIs, as they have a well-organised branch network in rural areas.

3.5 Linkage

3.5.1 GTZ services, benefits to clients

GTZ advises and assists banks, NGOs and savings and loan self-help groups (SHG) in establishing sustainable business relationships. Depending on the concrete context, GTZ supports various kinds of linkage, which can be classified using three basic models. Direct financial linkage (savings and loan) between banks and SHGs, where NGOs are

responsible for establishing and assisting SHGs. Indirect financial linkage (savings and loan) between banks and SHGs. In this model,

NGOs have not only the above function but also act as a financial intermediary. In other words, the financial linkage is between the banks and NGOs on the one hand and the NGOs and SHGs on the other hand.

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Direct linkage between banks and SHGs without involving NGOs, where the respon-sibility for establishing and assisting SHGs is handled by the banks themselves.

Within the framework of linkage programmes, GTZ advises banks on establishing financial connections with SHGs or NGOs, specifically on installing cost-efficient risk evaluation and credit technologies. GTZ also offers training measures for bank and NGO staff on establish-ing SHGs and on assisting them in introducing savings and loan activities. GTZ also offers advisory and training services for central banks, regulatory and supervisory agencies on implementing suitable conditions for linkage programmes.

3.5.2 GTZ experience BOX 4: ESTABLISHING SUSTAINABLE LINKAGES OF THEINFORMAL SELF HELP GROUPS WITH THE FORMALBANKING SYSTEMS IN INDIA

Background The National Bank for Agriculture and RuralDevelopment (NABARD), which is an apexorganization for policy framing and refinancinglaunched the Linkage Banking Programme in1996. The programme envisages formation ofSelf Help Groups from the assetless rural poor,who save regularly, pool their savings and dointernal lending from the savings. After theylearn the necessary financial discipline, they areprovided collateral-free loans by the banks. Sofar, about 11.6 million poor families have beenassisted under the programme through about0.7 million SHGs.

The GTZ contribution GTZ joined the programme in the year 2000mainly to support NABARD in capacity buildingefforts, facilitate access to international andlocal expertise and foster national policies,which can improve the framework conditionsnecessary for viable financial services of banksto the rural poor. The areas of expertise include: set up of a management information system institutional strengthening of financial

intermediaries financial products improvement training and upgrading of training methods strengthening the cooperative banking

sector (in cooperation with the GermanCooperative and Raiffeisen Confederation-

nformation, exposure,study and training visits.

DGRV)

International experience is also madeaccessible in the form of i

GTZ experience in the field has shown that the success or failure of linkage programmes depends very strongly on local conditions, and that these have a decisive influence on the concrete design of a linkage approach. Overall, the second of the models described above has proved least successful. Only a few NGOs are able to assume the function of an efficient financial intermediary. In addition, the large number of interfaces increase costs to the final borrower. The two other models have led in practice to three clearly distinct linkage approaches. The “empowerment approach”: This has emerged primarily in south Asia, in regions with a high proportion of poor population groups. Effective NGOs are essential for success. The focus is on the empowerment of poor population groups, specifically women, within the framework of directly combating poverty. The establishment of savings and loan activities is incorporated here into more com-prehensive measures to strengthen the self-help capacity of the target groups. These may include (among others) measures for improving literacy, health care, basic education etc.

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The “channelling approach”: This approach has established itself particularly in more economically advanced regions, like Thailand and parts of Indonesia. The target groups are generally economically active and less vulnerable than in the empowerment approach. In this approach, banks form customer groups which are solely a vehicle for enhancing efficiency and minimising costs and risks. Higher-level development tasks (as found in the empowerment approach) do not play any role. The function of the group is frequently limited to pure credit intermediation and peer pressure. Savings are mobilised individually if at all, and the group does not manage any funds of its own that are mobilised by members. NGOs generally do not have any role in this approach.

16

The “institution building approach”: BOX 5 : SAVINGS MOBILISATION IN THAILAND Economic reform and financial sector liberalisation in Thailand led to increased efforts from many banks to mobilise savings as an important source of funds. With technical assistance from GTZ, the Bank of Agriculture and Agricultural Cooperatives (BAAC) developed an innovative savings product called “Om Sap Thawi Choke” or “Save and Get a Chance”,

at micro- and small savers. By the end of product had attracted more than 2.3 million

depositors with an average deposit of Baht 3,900 (€ 83) and a total balance of almost Baht 9 billion (€ 193 million). In just six years, “Om Sap Thawi Choke” had come to represent 24 percent of BAAC’s deposit accounts and 10 percent of its total volume of individual deposits.

GTZ Contribution Assistance in the design of a savings product and

a corresponding marketing strategy. Product testing, allowing BAAC to offer the

product in about 600 branches in just two years. Assistance to Mobile Banking Units in support of

the product delivery Training, workshops and study trips to Germany

and Indonesia Assistance in the formulation of a savings

mobilization strategy for BAAC Support to the development of appropriate

transfer price mechanisme for the pricing of funds from the branches and for funds to the branches. Support to the development of a training manual

and test training for a “BAAC Service Culture”

targeted 2002, the

This approach has established itself primarily in regions where the population has no access to existing financial institutions (Nepal, parts of Indonesia). As in the cooperative model, the emphasis in this model is on financial self-help and further development of self-help groups within membership-based financial institutions. Member savings are the most important source of finance. Linkage with a bank is primarily for the purpose of maintaining the liquidity of the SHG and know-how transfer in establishing capacity for financial management within the SHG. Originally GTZ transferred approaches developed in an Asian context to other regions and adapted these to local conditions. In Burkina Faso, for example, a mix of the channelling and empowerment approaches was developed with a bank operating nationally, as a result of which over 700 women’s groups have now gained access to microcredits through the bank. The bank has steadily expanded its capacity for promoting women’s groups.

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Linkage approaches are also found in the transition countries. In Moldova, NGOs with GTZ assistance established more than 250 village savings banks throughout the country as finan-cial self-help groups, which have the status of a financial institution under special legislation. These are refinanced by two banks, and other banks are showing growing interest in this type of refinancing. The Moldavian example combines empowerment elements (direct relevance for poverty), channelling of funds from the banking sector and elements of institu-tion building, as the village savings banks and a newly-formed bank federation are all finan-cial institutions, with complementary functions to the local banking system, particularly in rural finance.

3.6 Mobilising savings

3.6.1 GTZ services, benefits to clients

Technical assistance in savings mobilisation is normally extended not as a „sole“ project but as an integrated part of support to microfinance institutions and/or development of microfinance products by non-microfinance institutions. In addition, savings mobilisation efforts can be part of restructuring processes in banks when focusing on institutional self-reliance.

Usually, savings mobilisation strategies are composed of appropriate savings products, responding to clients’ needs and potential for savings

generation, provisions for safety for the physical transport of funds as well as secure deposit

facilities, physical presence of the MFIs in clients’ working and living areas including social

proximity, acceptance and trust appropriate communication and media tools applied by MFIs sufficient resources in both money and time a clear vision and commitment by the financial institution on the necessity of savings

mobilisation

Savings mobilisation strategies are backed by product testing, comparative study trips and/or exposure training courses in regional or Western European contexts.

If savings mobilisation takes place in the context of bank branch networks, an adequate transfer price mechanism for funding between banks’ head offices and branches may be required. Technical assistance can be offered in establishing transfer pricing, decentralised branch controlling, profit centre concepts and performance assessment.

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3.6.2 GTZ experience

Increased savings with a MFI is a result of several factors, both internal and external to the MFI. The same applies to banks which decide to boost their savings mobilisation activities.

BOX 6: MICROBANKER®

The MicroBanking System for Windows or MBWIN is a banking software application developed through a joint project of the Food and Agriculture Organisation of the United Nations (FAO) and the Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ). It is a complete banking package that integrates front-office teller modules (savings account, time deposit, current account, loans account and share account) with a back-office general ledger module. MBWIN was developed using graphical-user-interface(GUI)-based tools. It runs on the Microsoft Windows platform from Windows 98 and Windows NT to Windows 2000. On top of the common banking features and functionalities, its multi-tiered design will in future accommodate an Internet-based banking facility, online inter-branch transaction processing, real-time ATM connectivity, phone banking and other advanced banking features. It also includes passbook design wizard, on-line signature and photograph retrieval and enhanced customer handling features. The system is highly scaleable in its network setup. Depending on the requirements of the financial institution, the three components of the system - client software, application server and database server - can be run together in just one computer (stand-alone) or separately from multiple workstations. The database is also scaleable from the basic Microsoft Database Engine (MSDE) to the more powerful database servers such as Microsoft SQL Server and Oracle.

Internally, MFIs need to make efforts to provide save and secure savings services. They should demonstrate good internal control of their risk and be properly supervised and rated by the respective public authorities and private auditing companies. Similar to micro lending, savings facilities need to be designed on the basis of clients’ business strategies and according to their needs. Successful savings mobilisation examples were built on thorough research of clients’ needs. Savings mobilisation is costly and not only because of higher regulatory require-ments. Internally, MFIs need a clear understanding and strategy toward savings mobilisation, not just regarding it as an additional source of funds. Savings services serve clients’ needs for depository facilities. Deposit taking MFIs are designed as financial intermediaries in the context of a local economy. The underlying assumption is that clients need both credit and savings and that also, following a system building approach at MFI level, both are necessary components of financial intermediation. Technical assistance for savings mobilisation efforts focus on long-term results. The process of support must move at a speed suitable for the MFI and be in line with their prioritising of savings mobilisation. Sometimes microfinance institutions are unsure whether poorer target groups are willing and able to save with them. Beside market research, as already mentioned, both MFIs and banks can learn from the experiences of similar institutions abroad in the form of study trips and exposure to international good practices. In addition, savings mobilisation offers a range of possibilities for closer cooperation between MFIs and

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banks. In many countries poor people save and contribute, within their limits, to a sustainable financial system. Externally to the MFI, savings mobilisation should be part of a national strategy for developing the microfinance sector which, in a strategic sense, makes the sector less reliable on external donor funding. Only when there is a common understanding between national actors and donors can domestic resource mobilisation be considered as a binding commitment and external resources be channelled into capacity building and investments with high sectoral impact. The abundance of credit lines can undermine such efforts.

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Conclusions and future orientations

4. Conclusions and future orientations

4.1 Reviewing the GTZ experience - a few words in conclusion

Microfinance has proved itself worldwide as a highly effective instrument for combating pov-erty and promoting income and employment among the poor but economically active popula-tion. Many studies on impact monitoring have repeatedly confirmed this. However, micro-finance represents an innovation. Developing a market for this innovation required not only microfinance institutions able to meet demand among this population for financial services, but also an institutional and statutory environment which promoted the development of MFIs. In line with its understanding of microfinance as a market and part of the financial system, GTZ has from the start supported the promotion of microfinance through a systems approach which seeks to combine the development of MFIs with the development of a supportive envi-ronment. Today, there is consensus in the donor community that simply supporting micro-finance institutions is no longer enough, and that sustainability and customer-oriented growth of MFIs can only be achieved through a systems approach and through cooperation between MFIs with other financial and non-financial institutions. At the same time the systems approach needs to be supplemented by including other actors, in order to respond to new issues, such as the future of MFIs after the withdrawal of ODA What remains to be done?

4.2 Governments’ agenda

For governments, the creation and maintenance of positive conditions for licensing and operating MFIs constitute an ongoing responsibility. Questions of taxation, respect for the private sector and civil society structures and a generally positive attitude towards microfinance based on a proper understanding of it are features not found in all countries. Like all financial institutions, MFIs reflect real economic developments. Where private sector economic activity is unable to flourish, microfinance is also unable to make a significant contribution. In many countries there is also the risk of politicising microfinance or using MFIs as an instrument for populist purposes, e.g. through heavily subsidised credit programmes.

4.3. Donors’ agenda

The promotion of microfinance is not solely the responsibility of donors. Equally, dependence on foreign donors, capital and foreign currency risks must not be perpetuated. For this pur-

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pose, more consideration must be given – by donors as well – to the option of strengthening domestic financial markets and their involvement in the microfinance sector. Donor aid should also aim at establishing capacity within governments for facilitating sectoral development. This is an important requirement for the sustainability of donor investment in the microfinance sector. Finally, although this has already been repeatedly stated, coor-dination rather than uncoordinated competition must be the guiding principle for donor in-stitutions.

4.4 The private sector’s agenda

MFIs need economically and socially responsible governance and ownership. The potential and limits of the private sector have yet to be exhausted, and are currently limited to socially responsible investors, the majority of which come from countries outside emerging and tran-sition countries. The risks in the microfinance sector are not necessarily greater than those in a hi-tech industry, where there was for a long time no problem in obtaining private capital. More and more, MFIs deliver good governance, effective risk management and transparency. The media are not always sensitive to the issue of microfinance and able to present it suitably, including for investors. Above all, the important issue appears to be reaching domestic investors.

4.5 Development policy relevance – GTZ’s perspective

Microfinance is already making a substantial contribution to the eight Millennium Develop-ment Goals adopted by the UN in September 2000, such as poverty and hunger eradication, empowerment of women and gender equality, and health and environmental sustainability. A widening gap between rich and poor, crises and armed conflicts through exclusion from education or productive assets are issues which GTZ is increasingly linking with the promotion of microfinance. It will develop its advisory services in this direction, so that the promotion of microfinance can continue to make a contribution towards important development policy issues. Generally, the growing concentration and centralisation of employment as an inherent trend of globalisation in many regions are inhibiting decentralisation at local level. This means local economic promotion and promoting regional exchange or local and regional economic cycles are necessary to counteract this trend. For GTZ, microfinance will be an important component of this movement towards decentralisation. With the trend among German and international donors to merge issues into complex pro-grammes and regard microfinance as just one component, GTZ still focuses its advisory services to the microfinance sector on maintaining and enhancing its overall capability and on its role as a catalyst in a country’s economic and social development. For example, cooperation between the microfinance sector and the classic banking sector can be

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Conclusions and future orientations

improved, e.g. by refinancing, integrating MFIs in international payments settlement or promoting joint measures in vocational training. In addition GTZ is seeking to help sectoral infrastructure develop further in order to reduce risks, establish quality standards, further professionalise the industry and make it possible for the sector to maintain its influence on its political and legislative environment. In future, significant impact by MFIs on combating poverty, economic growth, regional devel-opment and ecological sustainability can only be expected within functioning across-the-board microfinance and financial sectors.

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Appendix

5. Appendix

5.1 List of Publications

No. Year Title Language Author Format2004

91 2004 Emerging Scenarios for Microfinance Regulation in India

English B R Bhattacharjee Stefan Staschen

pdf

90 2004 Der Beitrag von Mikrofinanz zur Erreichung der Millennium Development Goals (MDGs) und des Aktionsprogramms Armut 2015

German Dirk Steinwand Carolyn Neufeld

pdf

89 2004 Microinsurance Sector Study - Sri Lanka

English Martina Wiedmaier-Pfister Ellis Wohlner

pdf

88 2004 Mikrofinanz: Weltweites Erfolgsmodell, nur nicht in Deutschland?

German Michael Roth Dirk Steinwand

pdf

87 2004 Measuring the Impact of Micro Finance

The Case of Financiera Calpiá, El Salvadore

English Stefan Jansen pdf

86 2004 Impact Assessment English Sebastian Jacobi pdf

2003

85 2003 Finanzsystementwicklung im Rahmen von WIRAM

German Detlef Radke pdf

84 2003 Rural Finance in Transition Countries

The Czech Republic

English Barbara Breitschopf pdf

83 2003 Rural Finance in Transition Countries

The Russian Federation

English Oxana Pichieva Ludmilla Schurejewa Katrin Vaitsenbreg-Schwetje Karin Schmidt Dr. Markus Diges Agrarwirtschaftliche Beratung Göttingen Rainer Schliwa

pdf

82 2003 GTZ Microfinance Operations English Rainer Schliwa pdf

81 2003 Lessons Learnt

Auswertung der Lernerfahrungen von Vorhaben der Finanzsysteme

Deutsch Jan Kerer pdf

80 2003 The Challenge of Sustainable Outreach: Five Case Studies in Asia

English Dirk Steinwand (ed.) with case studies from 5 GTZ-Projects

pdf

79 2003 The Challenge of Sustainable Outreach: Five Case Studies in AsiaAn Overview

English Dirk Steinwand Saliya Kanathigoda

pdf

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No. Year Title Language Author Format78 2003 Kreditinformationseinrichtungen für

den Bereich der Mikrofinanzierung German Gabriela Braun pdf

77 2003 Wirkungsanalyse von ländlichen Finanzinstitutionen

Eine Untersuchung am Beispiel Niger

German Birgit Schäfer pdf

76 2003 Regulatory Requirements for MF

A Comparison of Legal Frameworks in 11 Countries Worldwide

English Stefan Staschen pdf

75 2003 Microfinance Associations

Building a Microfinance Network in Albania - Challenges and Opportunities

English Lutz Grashof Rainer Schliwa

pdf

74 2003 Microfinance Associations

Their Role in Developing the Microfinance Sector

English Roland Groß Michael Brüntrup

pdf

73 2003 Microfinance Associations

Their Role in Developing the Microfinance Sector

Conference Proceedings

English Roland Groß Saliya Kanathigoda

pdf

72 2003 Microfinance Associations

Leur rôle dans le développement du secteur de la microfinance

French Roland Groß Michael Brüntrup

pdf

71 2003 Microfinance Associations

Leur rôle dans le développement du secteur de la microfinance

Actes de l´atelier

French Roland Groß Saliya Kanathigoda

pdf

2002

70 2002 Case Study of Selected Credit Bureaus

English Saúl Abréu Luna J. E. Austin

pdf

69 2002 Country Case Study Agricultural Bank of Mongolia

English Lutz Grashof pdf

68 2002 Estudio de casos de burós de crédito seleccionados en varios países latinoamericanos

Spanish Saúl Abréu Luna J. E. Austin

pdf

67 2002 Financiamiento de la MiPyme en Argentina

Spanish Cristina Solaris de Ortiz pdf

66 2002 Financiamiento la MiPyme en Chile Spanish Cristina Solaris de Ortiz pdf

65 2002 Finanzkrisen der „dritten Generation“ - Der Fall Asien

German Dirk Steinwand pdf

64 2002 Finanzwirtschaftliche Selbsthilfefonds (FSF) und andere Refinanzierungsstrukturen

German MACS (Thomas Schiller)

pdf

63 2002 La viabilité sociale d’une institution de microfinance

Atelier de formation et de réflexion

French Dominique Gentil Rainer Schliwa

pdf

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No. Year Title Language Author Format62 2002 Leasing Operations in Cameroon

and Chad English Günter Göttlich

Yulius Akene pdf

61 2002 Prepared for the 21st Century English Rainer Schliwa pdf

60 2002 Reaching the Poor Clients of Sri Lanka

English Lutz Grashof pdf

59 2002 Microfinance Associations

The Case of the Association of Microfinance Institutions in Ethiopia (AEMFI)

English Hayder Al-Bagdadi Michael Brüntrup

pdf

58 2002 Microfinance Associations

The case of the Ghana Microfinance Institutions Network (GHAMFIN)

English Hayder Al-Bagdadi pdf

57 2002 Les associations des institutions de microfinance

Le cas de l´Association Professionnelle des Institutions de la Microfinance du Mali (APIM/Mali)

French Michael Brüntrup pdf

56 2002 Associations des institutions de la microfinance

Le cas de l´Association Nigérienne des Institutions Professionnelles de la Microfinance (ANIP-MF)

French Michael Brüntrup pdf

55 2002 Microfinance Associations

The case of Microenterprise Alliance (MEA),

South Africa

Englisch Dr. Ludger Buescher Michael Roth

pdf

54

2002 Microfinance Associations

The case of the Association of Microfinance Institutions in Uganda (AMFIU)

English Svenja Jungbluth pdf

53 2002 Wirkungsanalyse von ländlichen Finanzinstitutionen

Eine Untersuchung am Beispiel der Côte d’Ivoire

German Birgit Schäfer pdf

2001

52 2001 Guidelines for Impact Monitoring and Assessment in Microfinance

English Birgit Schäfer pdf

51 2001 AFR No. 5

Prudential Regulation and Supervision for Agricultural Finance

English FAO /GTZ Michael Fiebig

pdf

50 2001 AFR No. 1

?Se justifica el replanteamiento de las finanzas agrícolas?

Spanish FAO / GTZ R. A. Roberts A. Hannig

pdf

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GTZ Microfinance Operations – An Update

No. Year Title Language Author Format49 2001 AFR No. 3 Spanish FAO / GTZ

Brigitte Klein Richard Meyer Alfred Hannig Jill Burnett Michael Fiebig

pdf

48 2001 AFR No. 4 Fuentes de recursos para crédito agrícola

Spanish FAO / GTZ Thorsten Giehler

pdf

2000

47 2000 Risk Management Framework English MicroFinance Network (ed.), Washington D. C. Shorebank Advisory Services, Chicago

pdf

46 2000 Financial Sector Study Kazakhstan English Flora Giassemi pdf

45 2000 Finanzsektor Studie Tansania German Heinz-Werner Marpmann pdf

44 2000 The Alchemy of Microfinance English Dirk Steinwand -

43 2000 How to Regulate and Supervise Microfinance – Key Issues in an International Perspective

English Alfred Hannig Edward Katimbo-Mugwanya

-

42 2000 Improving Internal Control English Anita Campion MicroFinance Network Washington D. C.

pdf

41 2000 Institutionelle Voraussetzungen der Entwicklungsfinanzierung

German GTZ (ed.) with contributions from German consultancy firms

pdf

40 2000 Investment-Fonds im Privatisierungsprozeß

Länderstudien: Polen, Rumänien, Kasachstan und Usbekistan

German Barbara Stelzer-O´Neill pdf

39 2000 Liquidity Management - A Toolkit for Microfinance Institutions

English Bankakademie International Micro Banking Competence Center Franfurt am Main

-

38 2000 Marketing for Microfinance Depositories

A Toolkit for Microfinance Instititutions

English Bankakademie International Micro Banking Competence Center Franfurt am Main

-

37 2000 AFR No. 6

Enhancing Farmers’ Financial Management Skills

English FAO / GTZ Jennifer Heney

pdf

1999

36 1999 Regulierung und Überwachung von Mikrofinanzinstitutionen – Fallstudie Südafrika

(nur pdf-Datei, nicht gedruckt)

German Stefan Staschen pdf

35 1999 Financial Sector Study Ghana English Sebastian Hofmeister pdf

34 1999 Financial Sector Study Yemen English Barbara Breitschopf pdf

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Appendix

No. Year Title Language Author Format33 1999 Challenges of Microsavings

Mobilization English Alfred Hannig/Sylvia

Wisniwski (eds.)

32 1999 Leasing als Finanzierungsinstrument für KMU und Agrarbereich

German Günter Göttlich

31 1999 Mobilizing Microsavings – The Millennium Change in Microfinance

English Alfred Hannig

30 1999 Regulation and Supervision Microfinance Institutions in South Africa

English Stefan Staschen pdf

29 1999 Regulierung und Überwachung von Mikrofinanzinstitutionen: State of Knowledge

German Stefan Staschen pdf

28 1999 Regulation and Supervision of Microfinance Institutions: State of Knowledge

English Stefan Staschen pdf

27 1999 Régulacion y Supervision de institutiones microfinancieras

Spanish Stefan Staschen pdf

26 1999 AFR No. 3

Better Practices in Agricultural Lending

English FAO / GTZ Brigitte Klein Richard Meyer Alfred Hannig Jill Burnett Micheal Fiebig

pdf

25

1999 AFR No. 4

Sources of Funds for Agricultural Lending

English FAO / GTZ Thorsten Giehler

pdf

1998

24 1998 Financial Sector Study

The Philippines English Alfred Hannig pdf

23 1998 Africa Conference – Savings in the Context of Microfinance

English Alfred Hannig (ed.)

22 1998 Analyse comparative des stratégies de la mobilisation de l´épargne

French Renée Chao-Béroff

21 1998 Cadre d’orientation pour la conception et la mise en œuvre des fonds de crédit

French Alfred Hannig (ed.)

20 1998 Entwicklung ländlicher Raum, No. 6, 1998

German Sylvia Wisniwski

Articles:

„Savings First Versus Credit First - The Importance of Mobilizing Savings for Setting up Rural Financial Systems”

German English French

Gertrud Schrieder/Alfred Hannig/

„The Role of the Central Bank in Setting up an Effective Rural Finance System: The case of Uganda“

German English French

Renate Klöppinger-Todd/Heinz Werner Marpmann

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No. Year Title Language Author Format „Formal and Informal Financial

Service Providers in Rural Financial Markets”

German English French

Michael Fiebig

19 1998 Förderbanken in Transformationsländern

German Flora Giassemi Alfred Hannig

18 1998 Savings in the Context of Microfinance – A Conceptual Framework; Uganda Conference 1998

English Alfred Hannig

17 1998 Savings in the Context of Microfinance Lessons Learned from 6 Deposit-Taking-Institutions

English Sylvia Wisniwski

16 1998 AFR No. 1

Agricultural Finance Revisited: Why?

English FAO and GTZ R. A. Roberts A. Hannig

pdf

15 1998 AFR No. 2

Agricultural Finance: Getting the Policies Right

English FAO and GTZ Elizabeth Coffey

pdf

14 1998 AFR No. 2

La Financiación Agrícola: Cómo Formular la Política Acertada

Spanish FAO and GTZ Elizabeth Coffey

pdf

1997

13 1997 Orientierungsrahmen für die finanzsystemgerechte Gestaltung und Handhabung von Kreditfonds

German GTZ pdf

12 1997 Guidelines for the Design and Management of Credit Funds

English GTZ

11 1997 Internationales Afrika-Forum:

Privatwirtschaftliche Finanzsystem-entwicklung in Uganda

German Gertrud Schrieder Renate Klöppinger-Todd Heinz Werner Marpmann

10 1997 Inventory of Savings Institutions CGAP Working Group on Financial Instruments and Savings Mobilization

English Alfred Hannig Laura Elser Sylvia Wisniwski

09 1997 Linkage Banking in Asia – Volume I

The Assessment of Linkage Projects

English APRACA and GTZ

08 1997 Linkage Banking in Asia – Volume II

Country Papers on Selected Topics

English APRACA and GTZ

1996

07 1996 Finanzsektor Studie Uganda German Heinz-Werner Marpmann R. Klöppinger-Todd G. Schrieder

06 1996 Akzente – Sonderheft: Fous Finanzsysteme

German GTZ

05 1996 Financial Systems Development and Microfinance

English Hans Dieter Seibel

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Appendix

No. Year Title Language Author Format04 1996 Querschnittsanalyse über die

finanzsystemgerechte Handhabung von Kreditfonds in der TZ – Kurzfassung

English GTZ

03 1996 Querschnittsanalyse über die finanzsystemgerechte Handhabung von Kreditfonds in der TZ – Langfassung

German Brigitte Klein / Klaus Maurer with contributions from Rolf Bergs Frank Dycweld

1989

02 1989 Linking Self-Help Groups and Banks in Developing Countries

English GTZ and APRACA Erhard Kropp Michael T. Marx Ballurkar Pramod Benjamin Quinones Hans Dieter Seibel

1987

01 1987 Handbuchreihe Ländliche Entwicklung: Ländliches Finanzwesen - Ein Orientierungsrahmen

German BMZ/GTZ/ DED Reinhard. H. Schmidt Erhard Kropp Ernst Weires

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5.2 Selected GTZ Microfinance Projects

Country Project Title Local Partners

Africa

Burkina Faso

Linking Banks and Self-Help-Groups The project aimed to implement a linkage scheme in Burkina Faso to adapt banking services to local conditions. Project activities included advisory and training services for self-help groups, the development and implementation of a monitoring and evaluation system, the improvement of coordination with NGOs and other partners, extension of the branch office system of the Caisse Nationale de Crédit Agricole and the development of new financial products such as savings facilities provided by mobile banking units.

Banque Agricole et Commerciale du Burkina formerly

Caisse Nationale de Crédit Agricole

Chad

Set-up of a Mutual Credit System in Mayo Kebbi The project is part of a strategy to promote self-help groups in the Mayo-Kebbi area, in Southeast Chad. Initially focusing on the self-help approach, starting from mid-1990s, the project has also granted loans to self-help groups and their federations. As the provision of such loans gained momentum, a specific task force for micro-lending and lending to self-help groups was created. GTZ granted extensive technical assistance to a network of savings and credit unions in Mayo-Kebbi. In addition, and with the objective of creating a regional approach to microfinance, regional NGOs providing financial services were also assisted. In June 2000, the project organised a round table with five commercial banks in N’Djaména, whose objective was to establish a commercial bank branch in Pala. The project produced two national-scale financial sector studies and has notably contributed to the creation of a national microfinance network in Chad.

Regional self-help group based farmers’ organisations

Congo

Strengthening the Microfinance Forum A nationwide association of microfinance institutions has been created which acts as a policy forum on behalf of their members. The project supports the Microfinance Forum in terms of strategic counselling, capacity building and financial support.

The Microfinance Forum

Ghana

Rural Finance Support Programm The project is part of the Rural Finance Support Program jointly supported by the World Bank, IFAD, AfDB and GTZ. The overall goal is to improve rural people's access to financial services. Existing financial institutions in rural areas have so far not proved capable of supplying their clients with adequate services. GTZ supports the new Apex bank for rural banks, selected rural banks and MFIs in various areas such as IMS, product development, savings mobilization, etc.

The Apex Bank for rural banks, selected rural banks and MFIs

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Country Project Title Local Partners

Mali Support to Decentralised Financial Institutions The project aims at implementing a national strategy to improve the financial system. This nationwide strategy has already been developed with active support from the project: consulting is being provided on further implementation. Other activities include establishment of a village banking scheme in selected regions, support for a national coordination committee and advice to regional associations and supervisory organizations on decentralized financial institutions. In addition, the project supports the foundation of a training institution and the creation of an information pool and documentation centre for the decentralized systems.

The Ministry of Finance

Mozambique

Institutional Support to SOCREMO The project provides assistance to a non-banking financial institution specialized in providing loans to microenterprises and small-scale traders in Maputo and Beira. Within the technical assistance package, GTZ renders the following services: training all levels of bank staff, improving the MIS, improving lending technologies, and advisory services to improve management services and governance structure. In addition, the German side strengthens the total balance of SOCREMO through equity contributions and a rotating credit fund.

SOCREMO

Uganda

Financial Systems Development The project executing agency is the Bank of Uganda, the central bank. As the systemic weaknesses in the Ugandan financial sector are located on several levels, project activities are designed to address the sectoral and institutional level. These activities complement one another and are integrated in a financial sector program with the following components: developing and testing a national payment and clearance system, developing and implementing a regulatory and super-visory framework for microfinance institutions, institutional strengthening of selected rural financial institutions at the Ugandan Institute for Bankers, institutional strengthening of the Ugandan Stock Exchange (public-private partnership with the German Stock Exchange Association).

Bank of Uganda

Asia

India

National Program Linking Banks and Self-Help Groups (NABARD) Under this project, technical assistance is provided to the National Bank for Agriculture and Rural Development (NABARD) in support of its national linkage program. The program aims at establishing viable and sustainable linkages between poor women organized in self-help groups and commercial and cooperative banks, with NGOs as intermediaries. Project focus is on strengthening regional rural banks and cooperative banks providing financial services to these self-help groups.

NABARD

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Country Project Title Local Partners

Indonesia Promotion of Small Financial Institutions The ultimate target groups of the project are current and potential small-scale and microsavers, and small-scale and microborrowers at the BPD and LDKP, especially small-scale and micro-entrepreneurs in all branches of the private sector in rural areas.

The total duration of assistance is to be ten years. The first phase is to run for three years, during which approaches will be tested in selected regions in the east; in particular, structural improvements will be made in the small bank sector.

Bank Indonesia

Nepal

Strengthening the Rural Finance System The project aims at improving the management skills of the Agricultural Development Bank of Nepal, establishing an appropriate system for local financial institutions and testing and disseminating appropriate financial technologies.

It also pro-motes ongoing dialogue with the central bank on the adequate supervision and regulation of small financial institutions.

Agricultural Development Bank of Nepal

Sri Lanka

People’s Bank – Financial Innovations in Rural Financial Markets The project is implemented by the People's Bank of Sri Lanka and aims to improve access to financial services for small and medium-sized enterprises, while at the same time improving the financial position and sustainability of the bank's branches. The project strategy involves focused training and advisory support to the People's Bank in developing financial services to meet demand and making procedural changes to raise efficiency and thus reduce transaction costs for the branches.

People’s Bank of Sri Lanka

Thailand

Linking Self-Help Groups and Financial Services (BAAC) The project assists BAAC in its transformation process from a specialized agricultural lending institution to a universal rural bank. Support is given in rural savings mobilisation to low income population groups. These savings mobilisation efforts have already reached more than 2 million additional small savers in BAAC. The project supports BAAC in the implementation of a “Service Culture” and at the same time improves the competence of BAAC branch staff. Venturing into non-farm lending and testing a decentralized branch profit centre concept are two other important focus areas of the project.

Bank for Agriculture and Agricultural Cooperatives (BAAC)

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Country Project Title Local Partners

Central and South America

Bolivia

Financial Sector Promotion The project seeks to use effective, sustainable and accessible financial institutions to meet the demand of poor segments of the Bolivian population, particularly in rural and remote areas, for better access to sustainable financial services. The project assists the state-owned second tier institution FONDESIF, which provides technical assistance and credit lines to microfinance institutions. In addition, the project aims at establishing second-level entities providing services such as training, consultancy and client data (credit bureau) and helps to develop savings mobilization strategies.

FONDESIF

Guatemala

Promotion of Micro, Small and Medium Enterprises The programme PROMOCAP follows an integrated approach, combining the following three components: 1. Market for Business Development Services (BDS), 2. Financial System Development, 3. Vocational Training. This includes interventions at the macro level (policy advice at ministry level regarding coherent sectoral policy for micro, small and medium enterprises), at the institutional level (strengthening availability and quality of financial and non-financial services, stimulating co-operation between the different actors) and selected interventions at the micro level. Furthermore, three transversal themes are addressed: 1. Local and Regional Economic Development (to become a fourth

component in 2002) 2. Financial instruments for investment financing in micro, small and

medium enterprises 3. Coherent policy formulation for the micro, small and medium

enterprise sector

Ministry of Economy

Honduras

Financial Sector Development The project aims at strengthening Honduras's microfinance institutions by assisting in creating second-tier institutions such as rating agencies, a credit bureau, advisory services and training institutions. It will not focus on particular financial institutions but on the sector as a whole. In addition, it will assist supervisory authorities in tailoring regulation and supervision to microfinance institutions. The project is part of a broader small enterprise promotion strategy.

Ministry of Economy

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Country Project Title Local Partners

Eastern Europe and CIS

Armenia

Integrated Food Security Programme South Armenia The project aims to help create new employment opportunities and thus improve food security in the medium and long term in the Sjunik region. Within the programme, Micro-Finance NGOs receive both financial and technical support, which is given in the form of institution building and training, and in addition training is provided to the groups and businesses for preparing business and finance plans. 3 Credit products are on offer: • •

Small business loans up to 5,000 US$ Agricultural credits as group lending up to 500 US$ per 9 month lending cycle

Women group credits up to 100 US$

World Vision Armenia Save the Children Kamurj

Kazachstan

SME Promotion The project is carried out in three regions in Kazachstan and aims to support start-ups and SMEs. One component of the project is a credit fund to support the target group by improving their access to credit. In Schimkent an existing fund “Fund for Farmers and SMEs” receives support in the form of capital, equipment and training. In Pavlodar, a credit line is established with the branch of Center Credit Bank. This line is designed exclusively for start-ups. Training and support is given in credit evaluation, monitoring, development of MIS etc.. In Kostanai, a fund is established with the purpose of exclusively serving start-ups. Support is given in setting up this fund, including through the extensive training of credit officers.

Fund for Farmers and SMEs CenterCredit Bank Fund for Start-ups

Kyrgyzstan

Strengthening and Development of Rural Financial Markets The project aims at developing a sustainable network of savings and credit co-operatives in rural areas to distribute ADB funds to the rural population. Major activities include the establishment of an apex institution for co-operatives and the development of a legal framework for the co-operative sector. IT development, Office organisation, product development and standardised procedures for Credits and Loans and a standardised bookkeeping according to international standards as well as the introduction of deposits in Credit Cooperatives. The development of Cooperative Associaltions and itsservice functions as well as the development and implementation of a sustainable distant learning training concept. The development of a professional Audit and Supervision as well as the introduction of an early warning system (PEARLS) is a major task of the project.

National Bank of Kyrgyztan

Financial Company for the Support and Development of Credit Unions.

Credit cooperatives

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