Case study

Business Generation and Job Creation through Microfinance (Final Report)

Revamping a microfinance program to improve portfolio quality
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This paper discusses a program by FINCA to support low income entrepreneurs through provision of microfinance services.

The paper provides details on the program activities between June 2002 to June 2004 including:

  • Number of loans disbursed;
  • Value of loans disbursed;
  • Portfolio outstanding.

The paper presents the external and internal challenges experienced by FINCA during the implementation:

External challenges:

  • Attracting and retaining qualified staff.
  • Market characteristics:
    • Advanced manufacturing and retail distribution sectors that severely constraints opportunities for small scale manufacturing;
    • Weak repayment culture among the poorest people as they have got accustomed to the state grants;
    • Geographic remoteness of poorest citizens.

Internal challenges:

  • Poor timing during scaling up;
  • Decline in performance due to weak accountability;
  • Depletion of the USAID funds.

The paper describes the process adopted by FINCA to identify the causes and remedies for improving the performance. It states that the recovery plan to reorganize includes:

  • Setting up of more stringent system of internal controls;
  • Reducing operational costs;
  • Increasing operational efficiency.

The paper also discusses the results achieved by FINCA in its fourth quarter:

  • Increase in productivity of credit officers;
  • Decrease in:
    • Operating costs;
    • Portfolio at risk.

The paper concludes by stating that FINCA has successfully identified and corrected its errors and is moving on a path to increase client portfolio along with maintaining portfolio quality.

About this Publication

By Sedykh, O.