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In response to a clear need by low-income people to gain access to the full range of financial services including savings, a growing number of microfinance NGOs are seeking guidelines to transform from credit-focused microfinance organizations to regulated deposit-taking financial intermediaries. In response to this trend, this book presents a practical 'how-to' manual for MFIs to develop the capacity to become licensed and regulated to mobilize deposits from the public. 'Transforming Microfinance Institutions' provides guidelines for regulators to license and regulate microfinance providers, and for transforming MFIs to meet the demands of two major new stakeholders regulators and shareholders. As such, it focuses on developing the capacity of NGO MFIs to mobilize and intermediate voluntary savings. Drawing from worldwide experience, it outlines how to manage the transformation process and address major strategic and operational issues inherent in transformation including competitive positioning, business planning, accessing capital and shareholders, and how to 'transform' the MFI's human resources, financial management, MIS, internal controls, and branch operations. Case studies then provide examples of developing a new regulatory tier for microfinance, and how a Ugandan NGO transformed to become a licensed financial intermediary. This book will be invaluable to regulators and microfinance NGOs contemplating institutional transformation and will be of tremendous use to donors and technical support agencies supporting MFIs in their transformation.
Nicole Tode evaluates the possible institutional development of Moroccan microcredit associations which intend to transform themselves from the status of non-governmental institutions (NGOs) into regulated microfinance banks. Such a transformation might increase their asset base, number of clients, average loan balance, and outreach, thus having a positive impact on microcredits in Morocco. The study, for which a comprehensive number of data sets from the microfinance information exchange (MIX) database was meticulously analyzed, addresses everybody dealing with or interested in the challenging situation NGO microfinance institutions find themselves in when planning to become commercial banks.
Transformations in the microfinance industry have been widespread practice globally since the late 1990s. Currently, transformed MFIs transact the bulk of all microfinance operations, measured by number of clients as well as portfolio size. However, the few transformations that have taken place in the Arab World have mostly involved transforming international microcredit programs into registered institutions, with many of them remaining unregulated. The reasons for this are mostly related to the broader enabling environment and to legal frameworks and regulations that include an increase in taxes owed under the new legal status. In addition, concerns of mission drift, long central to discussions of transformation, have led to skepticism of the process altogether. Lastly, MFI employees may have concerns about the transformation process, ranging from their personal beliefs to uncertainty about their future under a new for-profit company. In recent years, however, regulations in some Arab countries have changed, and other barriers to transformation, such as concerns about mission drift and doubts among staff, have been handled with greater delicacy and success. Accordingly, the time has come to take a closer look at what this process might entail. This paper presents the Arab context, and discusses the benefits, costs, challenges, and opportunities associated with transforming a not-for-profit into a for-profit entity - not necessarily a bank. While what has worked elsewhere may not necessarily be applicable in the Arab World, the body of evidence is quite clear that institutional growth is sustained by a variety of funding channels, and that the opportunity to grow and better serve the underserved has encouraged many MFIs in the Arab World to reconsider transformation. This study also presents the results of a survey conducted jointly by IFC and Sanabel to better understand where MFIs in the Arab World currently stand in the transformation process. The survey was sent by email to a select group of MFIs that are either the leading MFIs in their countries or have already expressed interest in transformation. It was composed of two sections. The first collected background information, particularly about their current legal structure and plans to transform. The second was addressed to MFIs that have already transformed or are considering transformation, to understand how they view the benefits and challenges. As a part of this undertaking, the survey also asked questions about the MFIs' interest in allowing staff to participate in the transformed entity's equity by setting up an employee stock option plan (ESOP). This is a form of staff compensation in which select staff are awarded shares in the share-capital company that employs them. A few MFIs in other regions have implemented ESOPs during transformation to address staff concerns, reward demanding work, and align individuals' goals with those of the institution. The survey sought to measure interest in ESOPs among respondents, as well as ask how they view the benefits, challenges, and appropriate terms of ESOPs. For MFIs wishing to explore this concept more deeply, Annex I of this paper addresses ways to implement ESOPs, and presents examples of MFIs that have elected to offer them.
The study examines the ownership structure, expectations, and achievements of microfinance institutions that have been established by transforming nongovernment organizations (NGOs) in Africa, Asia, and Latin America. Although the number of such institutions is low, they have had a catalytic effect and major influence on the microfinance industry.
* Addresses key issues related to bringing microfinance into the commercial realm * Written by prominent practitioners and scholars from a variety of organizations While many microfinance organizations started as NGOs, there is now a growing movement for them to transform into regulated, for-profit entities. Concurrently, commercial banks, credit unions, and specialized investors are also entering the market. The Commercialization of Microfinance synthesizes case studies from Latin America and beyond, delving into the trends and challenges of converting microfinance institutions into commercial entities. Prepared by ACCION, this book will be essential reading for anyone interested in understanding how the world of microfinance is changing, and how that world affects the broader processes of development.
The purpose of the 'Microfinance Handbook' is to bring together in a single source guiding principles and tools that will promote sustainable microfinance and create viable institutions.
This book explores the role and effect of Microfinance Institutions (MFIs) with different dimensions. It is being supported with strong empirical evidence into various parameters of MFIs directed towards inclusive finance and the transformation journey of livelihoods of its beneficiaries. It also incorporates empirical evidence with the perception of both beneficiaries and non-beneficiaries. Starting its journey toward the path of comprehending how MFIs make their footprint among the excluded population in the selected areas, it incorporates the different outcomes of MFI lending like credit utilisation patterns, income generation, and employability. As financial stability helps to break out the vicious cycle of poverty, this book emphasises the self-dependent element for the beneficiaries and their households. It addresses the important issue of the female counterparts in society. It shows how the MFIs work actively to generate female empowerment from multiple dimensions among the selected communities. It addresses key issues to consider for inclusive policy formulation, especially for backward communities in the backward areas and gives a realistic scenario of the MFI activities, their interactions with the respondents, the various outcomes, and areas for further developments, etc. This book is beneficial for academicians, researchers, and policymakers.
Following the positive impact of microfinance on poverty reduction, women empowerment, and microenterprise development in some countries in Asia and Africa, a huge amount of time has been devoted by researchers to understanding how this concept can be used as a catalyst for transforming and sustaining the economies of developing and emerging countries. Though there are a few books on the role of microfinance in reducing poverty in developing countries across world, there is no specific book that explores the role of microfinance in transforming and sustaining economies of developing and emerging countries. Transforming Economies Through Microfinance in Developing Nations seeks to explore how the provision of microfinance to individuals and groups can contribute to the economic transformation and sustainability of the economies of developing and emerging countries. Covering key topics such as climate change, entrepreneurship, and rural development, this reference work is ideal for government officials, entrepreneurs, policymakers, researchers, academicians, practitioners, scholars, instructors, and students.