Networking,Training & Technical Cooperation for Microfinance Growth & Sustainability WORKSHOP “Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul Dr. Mostaq Ahmmed FINCA International-Afghanistan

Introduction-FINCA International FINCA has been operating for over 20 years, having been established in 1984, by Dr. John Hatch. Dr. John Hatch had conceived a small loan program for low-income farmers that put them in charge. The program allowed them to obtain loans without collateral—their main obstacle to accessing credit—at markup rates they could afford. His program became known as “Village Banking.”

Countries where FINCA Operates FINCA Currently Operates in 22 Countries Around the Globe Africa Malawi Uganda Congo Tanzania Zambia Eurasia Azerbaijan Armenia Georgia Kosovo Kyrgyzstan Tajikistan Uzbekistan Russia Latin America Mexico Ecuador Guatemala Nicaragua El Salvador Haiti Honduras Middle East Afghanistan Jordan

Financial and Non-Financial Services offered by FINCA International Financial Services Microcredit SME Loans Murabaha Loans Health Insurance Life Insurance Savings Non-Financial Services Health Education Financial Education Skills/Vocational Training Networking with other NGOs and organizations

FINCA Product and Services FINCA Uganda –Microinsurance: FINCA covers the debt of a dead village bank member, so it does not result in hardship for the family. FINCA Azerbaijan –SME Loans: FINCA's product offerings have expanded to include larger, individual loans, collateralized by office or specialized equipment, vehicles, or property. FINCA Malawi –Health Education: FINCA’s network of village banks is used to provide HIV/AIDS prevention education to clients.

FINCA-Afghanistan Islamic Microfinance Program The demand for Islamic banking amongst Afghans led FINCA Afghanistan to create Islamic banking products, ever since opening its doors in Its products were created in consultation with local community leaders and received a fatwa of approval from the famous Islamic Al-Azhar university in Cairo, Egypt. In 2006, FINCA introduced a new line of Murabaha products, in response to its evaluation of local market demands.

FINCA’s Interest-Free Loans Since all FINCA loans are based on Murabaha principles, FINCA does not charge interest, but a markup rate. FINCA does not charge a fee on borrowed money, rather, it charges a profit margin on goods sold to clients, just like a vendor charges a markup on sold goods.

FINCA Afghanistan Statistics Clients: 41,213 Village Banks: 5,529 Portfolio: $8,324,142 Average loan size: $329 Staff members: 387 Clients per CO: 187 PAR: 0.6%

FINCA’s Global Statistics Countries in Operation22 Active Clients500,030 Portfolio Outstanding$173,338,572 Average Loan Outstanding $432 Portfolio at Risk >30 Days 2.8% Savings Mobilized$17,505,561

Microfinance's Mission is to Fight Poverty Worldwide by -Empowering poor people and allowing them to generate income through providing them credit and other financial services -Creating employment, increasing poor people’s income and thus reducing their vulnerability Among the Future Issues of the Sector, a Key Issue is to Continuously Reach Large Number of Poor People in Sustainable Manner Challenging Issues in Microfinance Sector Innovation Funding Legal Framework Capacity Building Outreach Current Challenging Issues A substantial outreach is a guarantee of efficiency that can play a large part in leveraging funds

Top Management Middle CONCEPTUAL HUMAN TECHNICAL Relative Skills Needed for Effective Performance at Different Levels of MFIs Management First-line Management

Structural Strength Institutional Planning and Development Working Environment Operational Efficiency Good Communication and Understanding Management Efficiency Training and Technical Cooperation are Prerequisite for Microfinance Growth and Sustainability

Summary of Activities & Diagram Effective circulation of information Assessment of customers satisfaction and opinion + = Empowerment of the existent human capital Solutions to Poor People Specific Needs Increased Outreach Head Office Management Team Branch Offices Human Resources Marketing Communication Policy & Demand-led Strategy Definition Policy & Strategy Implementation + External Environment Money Lenders Other MFIs Commercial Banks Targeting Products delivery Identification of potential customers Close answer to customers need for financial services + + Decentralization Standardization

Organizational Structure Field Level Middle Management Management Team Policy Making, Strategic Planning and Monitoring Management Team Policy Making, Strategic Planning and Monitoring Branch Manager Area AArea BArea C Credit Officers Standardization & Decentralization Democratic Structure Regional Manager Supervision, Monitoring & Training Regional Manager Supervision, Monitoring & Training Operations Expansion Human Resources Accounts, Audit and Procedure Standardized Number of Borrowers Branch Manager Credit Officers Field Visits Marketing & Communication Top Management

MFI’s Products and its Management Products and Services of Microfinance Deposit Services Voluntary Savings Services Mandatory Savings Services Credit Services Small Credit Small Business Credit Credit for Micro Entreprises Other Financial Services Micro-insurance Life Insurance Health Insurance Loan for Housing, Education, Health... Non Financial Services Family Health and Sanitation Education Financial Education Micro-entrepreneur Training Financial Services To Tailor ‘need-based’ Products, Credit Officers & Branch Staff Should be Empowered to Take into Account Clients Suggestions and Complaints

Delivery Mechanism Screening of potential customer by credit officer = socioeconomic survey to ensure borrower’s repayment capacity and business viability Loan Disbursement Repayment Procedure & Follow up -Weekly instalments -Fixed day, time and place -Limited length -Physical presence ensured by record of attendance -Geographical proximity -Customer service standards -Physical presence of the borrower -At branch office\borrower’s home -Simple forms Field Level Decentralization of decision making for customer admission The Delivery Mechanism of MFIs Products and Services should be Standardized to Ensure Speed and Efficiency According to Poor People Particular Needs

Key Components of Cost-effective Management Capacity Building Decentralization Organizational structure On the job training Close communication Standardization Working manual, written guidebook Human capital empowerment Marketing tools

Need Based Training To Institutional Culture To Job Skills and Aptitudes For new staff members:on-the-job training About the institution’s strategy and operations About the MFI’s values and issues (particularly client focus) On an ongoing basis To their general role and daily duties through ‘on-the-job training’ in practical work situation with a close supervision from an experienced employee To customer service standards (how to create an environment where client feel comfortable voicing his opinion, suggestions and apprehension) To marketing techniques to assess customer satisfaction and needs To help customers improve their business Training Tools -Guidebook -Training Manuels -Operations Manuels -Interactive courses -Field Training -Discussions… Training Tools -Guidebook -Training Manuels -Operations Manuels -Interactive courses -Field Training -Discussions…

Training Content for MF Capacity Building Microfinance Operations 1. Marketing Strategy and Microfinance Clients Targeting Methodology 2. Microfinance Products, Services and Lending Procedures 3. Microfinance Lending Methodology: Individual and Group Lending 4. Microfinance Islamic Lending Methodology 5. Institutional Business Planning for Microfinance Program 6. Financial Planning & Analysis 7. Savings and Credit Management 8. Program Operational Policies and Procedures 9. Accounting and Record Keeping 10. Auditing for Microfinance Operation 11. Management Information System 12. Branch Manager Leadership Training: Managing, Controlling, and Reporting Tools 13. Detection of Fraud and Internal Control 14. Monitoring and Supervision System 15. Delinquencies and its Management Microfinance Training & Capacity Building Methods 16. Microfinance Training Methodology and How to Build Efficient Workforce? 17. Staff Motivation & Built in Cost effective Training Component 18. Human Resource Planning and Development 19. Good Governance Microfinance Operations 1. Marketing Strategy and Microfinance Clients Targeting Methodology 2. Microfinance Products, Services and Lending Procedures 3. Microfinance Lending Methodology: Individual and Group Lending 4. Microfinance Islamic Lending Methodology 5. Institutional Business Planning for Microfinance Program 6. Financial Planning & Analysis 7. Savings and Credit Management 8. Program Operational Policies and Procedures 9. Accounting and Record Keeping 10. Auditing for Microfinance Operation 11. Management Information System 12. Branch Manager Leadership Training: Managing, Controlling, and Reporting Tools 13. Detection of Fraud and Internal Control 14. Monitoring and Supervision System 15. Delinquencies and its Management Microfinance Training & Capacity Building Methods 16. Microfinance Training Methodology and How to Build Efficient Workforce? 17. Staff Motivation & Built in Cost effective Training Component 18. Human Resource Planning and Development 19. Good Governance

Technical Cooperation for Growth & Sustainability Creating Apex Funding Body and Ressources Mobilisation for OIC Member State Knowledge Hub and Resource Centre Training Institute Exchange Expertise and Best Practices Technology Transformation Green Fielding Friendly and Flexible Regulation for Microfinance Practices

Why MFIs Need Micro Finance Training and Technical Support ? Maximizing Effeciency To Standardise and Improve its Services Through the Need Basis Training Maximum Utilisation of Manpower To Integrate its Exparts and Training Tools to Managing Growth To Develop a Cost-effective and User-friendly Methodology for Training and the Use of Technology To Develop the Professional Expertise Through –Sharing best practices and –Increasing the opportunities to network on a regular basis –Evaluating training activities systematically –Developing a built in training process for human resourse development

How Effective Training Can Maximise Efficiency & Reduce Costs ? Decentralization of Decision Making -Front line agents empowerment in the process of field decision making -Procedure standardization and fund management decentralization -Duties and scope for initiative\decision making clearly explained at each hierarchical level Optimization of Existent Resources -More responsibilities given to front line agents along with loan repayment task (average client and portfolio per credit officer) -Vehicle for collecting client information and conveying MFI image during group meetings -Close watch over staff turnover rate to prevent departures and related costs -Skills and practice accumulation of staff member thanks to on going training allow promotion Non Conventional Staff Recruitment -Adapted personal competences ( neither too low, nor too high) -Group interviews and situation tests allowing savings in time and cost reduction -On-the-job training in practical work situation -Close supervision from colleagues and immediate superior

For More Information Please Contact Dr. Mostaq Ahmmed FINCA Afghanistan Microfinance and Development Expert THANKS