Cover -- Title Page -- Contents -- Foreword -- Preface -- Introduction -- Introduction -- Microfinance Defined -- Background -- Size of the Microfinance Industry -- Why is Microfinance Growing? -- What Are the Risks of Microfinance? -- About This Book -- Organization of the Book -- Part I-Issues in Microfinance Provision -- Part II-Designing and Monitoring Financial Products and Services -- Part III-Measuring Performance and Managing Viability -- A Necessary Caveat -- Sources and Further Reading -- PART 1 Issues to Consider When Providing Microfinance -- CHAPTER 1 Understanding the Country Context -- Introduction -- Suppliers of Financial Intermediation Services -- Existing Microfinance Providers -- The effect of government programs on private providers -- The effect of private microfinance providers on other suppliers -- What Role Do Donors Play in Microfinance? -- Financial Sector Policies and Legal Enforcement -- Interest Rate Policies -- Government Mandates for Sectoral Credit Allocations -- Legal Enforcement of Financial Contracts -- Financial Sector Regulation and Supervision -- When Should MFIs Be Subject to Regulation? -- Risk factors of MFIs -- Means of regulating MFIs -- Considerations When Regulating MFIs -- Minimum capital requirements -- Capital adequacy -- Liquidity requirements -- Asset quality -- Portfolio diversification -- Country Approaches to Regulating MFIs -- Economic and Social Policy Environment -- Economic and Political Stability -- Inflation -- Growth rate -- Transition and political unrest -- Poverty Levels -- Investment in Infrastructure and Human Resource Development -- Government View of the Microenterprise Sector -- Appendix 1. Risks in the Microfinance Industry -- Ownership and Governance -- Management Risks -- New Industry -- Sources and Further Reading -- CHAPTER 2 The Target Market and Impact Analysis.

Introduction -- Objectives of the Microfinance Institution -- Direct and Indirect Targeting -- The Importance of Adequate Cash Flow and the Capacity to Service Debt -- Minimal Equity Requirement -- Moral Hazard -- Market Size -- Identifying the Target Market -- Characteristics of the Population Group -- Focusing on female clients -- The level of poverty -- Geographic focus -- Ethnicity, caste, and religion -- Types of Microenterprises -- Existing or start-up microenterprises -- Level of business development -- Type of business activity -- Impact Analysis -- Kinds of Impacts -- Economic impacts -- Sociopolitical or cultural impacts -- Personal or psychological impacts -- What Kinds of Impacts Have We Seen with Microfinance? -- At the household level -- At the individual level -- Impact Proxies -- Client-Oriented Impact Analysis -- The dilemma of the human subject as a "dynamic target." -- Client transparency and honesty -- The vested interest of the assessment team -- The attribution dilemma -- Hypothetical impacts in the absence of services -- Temporary impacts -- When Should Impact Be Assessed? -- Impact assessment before intervention -- Impact assessment after intervention -- Impact assessment during intervention -- Methods of Impact Assessment -- Fundamental Characteristics of Qualitative Approaches -- Fundamental Characteristics of Quantitative Approaches -- Comparisons of Quantitative and Qualitative Approaches -- Integrating Methodologies -- The Choice of Unit of Analysis -- The client as a client -- The client as an individual -- The enterprise -- The subsector -- The household economic portfolio -- Appendix 1. Quantitative Impact Assessment -- Sources and Further Reading -- CHAPTER 3 Products and Services -- Introduction -- The Systems Framework -- Microfinance Institutions-Minimalist or Integrated? -- Financial Intermediation -- Credit.

Individual lending -- Group-based lending -- Savings -- Compulsory savings -- Voluntary savings -- Insurance -- Credit Cards and Smart Cards -- Credit cards -- Smart cards -- Payment Services -- Social Intermediation -- Enterprise Development Services -- Social Services -- Appendix 1. Microfinance Approaches -- Individual Lending -- Method -- Products -- Significant examples -- Appropriate clients -- Grameen Solidarity Group Lending -- >Method -- Products -- Significant examples -- Appropriate clientele -- Latin American Solidarity Group Lending -- Method -- Products -- Significant examples -- Appropriate clientele -- Village Banking -- Method -- Products -- Significant examples -- Appropriate clientele -- Self-Reliant Village Banks (Savings and Loans Associations) -- Method -- Products -- Significant examples -- Appropriate Clientele -- Appendix 2. Matching Enterprise Development Services to Demand -- Circle 1. The Business Operator -- Circle 2. The Business Itself -- Circle 3. The Subsector -- Expansion of the range of suppliers and customers -- Networking and entrepreneurs clubs -- Market infrastructure improvement -- Circle 4. Beyond the Local Marketplace -- Sources and Further Reading -- CHAPTER 4 The Institution -- Introduction -- The Importance of Institutions -- Attributes of a Good Institution -- The Importance of Partner Institutions -- Institutional Types -- Formal Financial Institutions -- Public development banks -- Private development banks -- Savings banks and postal savings banks -- Commercial banks -- Nonbank financial institutions -- Semiformal Financial Institutions -- Credit unions, savings and loan cooperatives, and other financial cooperatives -- Financial NGOs -- Informal Financial Providers -- Institutional Growth and Transformation -- Expansion Within an Existing Structure -- Creating an Apex Institution.

Creating a Formal Financial Intermediary -- Governance and Ownership -- Governance -- Ownership -- Accessing Capital Markets -- Accessing Debt -- Accessing Equity -- Equity Investment Funds -- Socially Responsible Mutual Funds -- Securitization -- Institutional Capacity Building -- Appendix 1. MFI Operational Review -- Definition -- The Tool -- How the Tool Works -- Operational Review: An Outline -- 1. Corporate governance -- 2. Markets and clients -- 3. Credit methodology -- 4. Distribution -- 5. Human resource management -- 6. Computerization -- 7. Financial management -- Appendix 2. Manual for Elaboration of a Business Plan -- Definition -- The Tool -- How the Tool Works -- 1. Introduction -- What is business planning? -- How is it used? -- Who participates in the business planning process? -- What are the characteristics of a successful business plan? -- 2. Business plan format -- 3. Institutional analysis -- History of the institution -- 4. Basic premises -- 5. Portfolio analysis and projections -- 6. Financing expansion -- 7. Operational costs-past and projected -- 8. Priority projects -- 9. Financial statements -- Sources and Further Reading -- PART 2 Designing and Monitoring Financial Products and Services -- CHAPTER 5 Designing Lending Products -- Introduction -- Cash Patterns, Loan Terms, and Payment Frequency -- Client Cash Patterns and Loan Amounts -- How Does the Loan Term Affect the Borrower's Ability to Repay? -- Frequency of Loan Payments -- Working Capital and Fixed Asset Loans -- Loan Collateral -- Collateral Substitutes -- Group guarantees -- Character-based lending -- Frequent visits to the business by the credit officer -- Risk of public embarrassment -- Risk of jail or legal action -- Alternative Forms of Collateral -- Compulsory savings -- Assets pledged at less than the value of the loan -- Personal guarantees -- Loan Pricing.

Calculating Interest Rates -- The declining balance method -- The flat method -- How Do Fees or Service Charges Affect the Borrower and the MFI? -- Cross-Subsidization of Loans -- Calculating Effective Rates -- Estimating the Effective Rate -- Calculating the Effective Interest Rate with Compulsory Savings or Other Loan Variables -- Calculating the Effective Interest Rate with Varying Cash Flows -- How does the Effective Cost for the Borrower Differ from the Effective Yield to the Lender? -- Appendix 1. How Can an MFI Set a Sustainable Rate on Its Loans? -- Appendix 2. Calculating an Effective Interest Rate Using the Internal Rate of Return Method -- Base Case: Declining Balance Interest -- Alternative 1: Flat Interest -- Alternative 2: Up-front Interest Payments -- Alternative 3: Loan or Service Fee -- Alternative 4: Weekly Payments -- Alternative 5: Compulsory Savings with Interest -- Alternative 6: Group Fund Contribution -- Appendix 3. Calculating the Effective Rate with Varying Cash Flows -- Sources and Further Reading -- CHAPTER 6 Designing Savings Products -- Introduction -- Demand for Savings Services -- Is There an Enabling Environment? -- Legal Requirements for Offering Voluntary Savings Services -- Licensing -- Reserve Requirements -- Deposit Insurance -- Does the MFI Have the Necessary Institutional Capacity to Mobilize Savings? -- Ownership and Governance -- Organizational Structure -- Human Resources -- Marketing -- Infrastructure -- Security and Internal Controls -- Management Information Systems -- Risk Management and Treasury -- Sequencing the Introduction of Savings Services -- Types of Savings Products for Microentrepreneurs -- Liquid Accounts -- Semiliquid Accounts -- Fixed-Term Deposits -- Costs of Mobilizing Voluntary Savings -- Pricing Savings Products -- Sources and Further Reading -- CHAPTER 7 Management Information Systems.

Introduction.