Management

MANAGING RISK AND CREATING VALUE WITH MICRO FINANCE

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when World Bank staff members meet with representatives of a country’s microfi nance sector, microfi nance
institution (MFI) managers often assume that they will receive some kind of new fi nancing—credit
lines, guarantees, or grants—to support their development eff orts. Th ey do not expect the Bank to provide
technical assistance or best-practice information.
More recently, however, representatives in four countries have observed that, in keeping with the World Bank’s
new role as a “knowledge bank,” the Bank’s new knowledge-sharing priorities mean that it can provide more than
just new funding. It can provide access to recent developments in international best practices in microfi nance
management, build South-South learning dialogues, and address strategic and operational challenges. As a
result of this realignment of Bank priorities, MFI managers have access to world-class expertise, innovative
technologies, and tools in risk management.
Th is report brings together the results of an eight-part series of presentations by leading experts in issues
directly related to microfi nance institutional sustainability. It is intended for MFI board members, managers,
and staff members—as well as for government regulators, supervisors, and donor staff members. Th e fi rst four
chapters include topics in risk management: (1) risk management systems, (2) good governance, (3) interest
rates, and (4) microinsurance. Th e last four chapters include four topics in new product development and
effi cient delivery methodologies: (5) housing microfi nance, (6) microleasing, (7) disaster preparedness products
and systems, and (8) new technologies.
Microfi nance practitioners and government supervisors and regulators in Bolivia, Colombia, Ecuador, and Peru
participated in the presentations and discussions. In addition, a group of Argentine practitioners was able to
view the presentations through simultaneous Webcasts. Th e objectives of the series were as follows:
• To strengthen MFIs by disseminating innovative approaches in risk management, cost control, governance,
and new technologies
• To promote a South-South exchange of experiences and lessons learned
• To promote greater ties among the MFIs in the region and between MFIs and government supervisors
and regulators
• To highlight the Bank’s ability to mobilize international technical expertise in microfi nance
Th e World Bank’s move to engage with MFIs in the four countries began in 2006, which was a critical year
for microfi nance in Latin America. In that year, the Bank identifi ed a new trend of fi nancial sector policies—
represented by newly elected governments in Bolivia and Ecuador—that would ultimately and artifi cially
lower microfi nance interest rates, interfere with the sustainability of MFIs, and reduce outreach. Rather than
expanding product menus and introducing cost-saving technologies, the new governments sought to improve
access to credit by mandating interest rates below the rate of infl ation. Experience has shown that such a policy
leads to credit diversion and a decrease in sustainable lending to microbusinesses and poor households.
In contrast, the Peruvian and Colombian governments moved to ensure the growth of a commercial microfi nance
industry through a number of sound regulatory and supervisory options. Given such developments, the Bank
saw an opportunity to sponsor a broad policy dialogue with the policy makers and representatives of national
microfi nance industries to review policy

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: .,

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Language

English

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978-0-8213-8228-8

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NONE

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