SOCIAL PERFORMANCE IN THE MFIs

Introduction One of the ways of gauging the social mission and vision of the MFI to the operations of the organization is called Social Performance Management. Definition Social performance is defined as “the effective translation of an institution’s mission into practice in line with accepted social values.” In other words, social performance is about making an organization’s social mission a reality, whatever that mission is (Source: Social Performance Task Force). Social performance management (SPM) refers to the systems that organizations use to achieve their stated social goals and put customers at the center of strategy and operations. A provider’s social performance refers to […]

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FINTECH IN THE MICRO-FINANCE SECTOR

Introduction After carefully considering the Risk Management and issues associated with staff fraud, we now turn our attention to how MFIs can improve their institutions and deliver services to their clients in affordable yet efficient manner. One such tool is the application of technology for both front-end and back-end. At the front end, where clients are served either directly or indirectly, we shall look at Fintech. There are still two billion unbanked people around the world. According to the Global Findex Report, as many as 72 per cent of these live in South Asia, East Asia and the Pacific and […]

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STRATEGIES FOR FRAUD DETECTION & PREVENTION

Introduction Last week, we looked at the introduction of risk management and we gave hints on employee frauds, a significant cause of most institutions’ failures. We looked at the fraud triangle and link them to the MFI and banking sector. Today we shall look at how we could prevent the fraud and also how to detect them by putting in place controls, procedures, and policies. Employee fraud is a significant problem faced by organizations of all types, sizes, locations, and industries. While everyone would like to believe employees are loyal and working for the benefit of the organization (and most of […]

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DEALING WITH FRAUD RISKS IN THE BANKING & MFI SECTOR

Last week, we looked at how the Central (or Reserve) Bank could use capital adequacy – part of national requirements for banks – to control and manage the financial institutions in a particular way. This was based on Basel II and Basel III. We also looked at the reason why some banks and financial institutions do fail. Today, we shall look at how the financial institutions could avoid or prevent such occurrences. One of these steps the financial institutions could adopt is called Risk Management. What is risk management? Risk management is the process of identifying, assessing and controlling threats […]

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WHAT IS CAPITAL ADEQUACY OF BANKS AND FINANCIAL INSTITUTIONS?

Introduction Over the last months, we have been looking at banking and other financial institutions and how the microfinance institutions operate. Today, we shall look at the capital of these institutions and how the regulators assess them. We shall look at the historical development starting from 1974 till date. Historical development Basel is a city in Switzerland. In 1974, all G-10 countries’ Central Bank Governors met in Basel in order to see how banking could be improved through a common guidance. Various policies were developed since then, but the most important one became operational in 1988 which is called Basel […]

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THE IMAGE ON THE WINDOW: A BUDDHIST HOUSE

I captured this image of the window of a certain office at the outskirt of an Asian city I visited in not too distant past. The owner of the building is a Buddhist. I need not write about it and I need not talk about it if I were to find it in a Christian home. But because of the wanton conceit and irresponsible spiritual indolence of the present-day mankind, I thought it wise to bring it across. What do you know about this thing and what does it represent? At the most sacred places of the Catholic church, you […]

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LENDING METHODOLOGIES IN THE MFI SECTOR

Introduction In the previous articles on the introduction to microfinance which was followed by sources of funding to the Microfinance Institutions (MFIs), we continue to deepen our knowledge in the field. We shall continue today with lending methodologies and look at how they help in developing clients upwards in poverty reduction. Methodologies These refer to how the loans are offered to the general public. How are the clients identified, selected, grouped, and which methods are selected for the offering of services to the clients or customers in general! In this wise, we shall focus on group loan and individual loan […]

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SOURCES OF FUNDING FOR MFIs

Introduction In the last month, we gave out an introduction to banking and other financial institutions. We also looked into a few details of the microfinance institutions (MFIs) and how they are different from the banks. Today, we shall look at the sources of funding to these MFIs and how they are able to amass adequate funding in order to serve their clientele. Shareholders’ Equity Many financial institutions are owned by wealthy individuals and corporate institutions. They put together the initial or seed capital of the business to kick-start the operation. This initial capital is used to get the license, […]

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YOUR CONFIDENCE INTERVAL

A confidence interval is defined as a range of values so arranged that there is a specified probability that the value of a parameter lies within it. Don’t mind the “book-long” definition. Ever since the divorce of mathematics and accounting in 1494 by the judge called Luca Pacioli, there still have been flirtation between the two. They refused just to get separated! And for this reason, no accountant is immune from mathematics. But that is not what I want us to talk about today. I want us to talk about the mathematical term called ‘confidence interval’ and how you can […]

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