Technical Assistance to the Democratic Republic of Timor-Leste for Strengthening Microfinance Operations

This paper discusses the technical assistance provided to the government of Timor-Leste by the Asian Development Bank (ADB) for its Microfinance Development Project. The features of the project were:

• It was to support community based opportunities for income generation and sustainable employment;
• It established and registered the Foundation for Poverty Reduction and the Microfinance Institution of Timor-Leste (IMFTL);
• ADB provided two grants to:
  • Strengthen the microfinance policy and legal framework;
  • Develop microfinance information technology systems.

The paper then discusses:

• Various aspects of the functioning of IMFTL, such as competition, market penetration, revenues and operational performance, etc.
• The different aspects of the TA provided in terms of:
  • Purpose and output;
  • Methodology and key activities;
  • Corporate governance;
  • Operational performance and monitoring;
  • Client orientation;
  • Business and strategic plans;
  • Cost and financing.

Some of the recommendations that the paper makes are:

• The management capacity, operational and financial performance, and product and service delivery of IMFTL has to be improved;
• Outreach to certain market segments, such as market vendors and the rural poor has to be improved;
• The board of directors need to focus on key performance indicators for outreach, efficiency, asset quality and profitability and set performance targets;
• IMFTL's salary structure needs to be reviewed and staff incentives need to be provided for productivity and high asset quality.