|
|
Yes! I want to support microfinance and empower people to work their way out of poverty.
|
|
|
| Assisting Commercial Banks to Start Microfinance ProgramsBenefits to Institution | Our Services | Contact Us
Commercial banks, with their extensive physical, financial and human resources, can launch and expand microfinance services more efficiently and relatively less expensively than pure start-ups. Retail-oriented banks with large branch networks can distribute fixed costs among many financial products and reach economies of scale in microfinance quickly. However, most banks lack experience with the microfinance market and its clientele, and often dismiss this segment as too risky and too expensive. Banks also lack the appropriate credit methodologies to reach this sector successfully. With a conservative outlook, banks may tend to burden microfinance with policies and procedures that prevent its success.
Benefits to Institution
When the obstacles that have traditionally kept commercial banks out of microfinance are overcome, banks can be highly competitive in the microfinance arena because of their low cost structure, branch network and access to human and financial resources. They can bring benefits to microfinance customers including potentially lower prices and a full array of financial services.
ACCION’s Services
ACCION uses several models to work with banks interested in microfinance: - An internal unit within the bank;
- A financial subsidiary;
- A Private Service Company;
- Creation of new MFIs with bank co-investors.
The basis for choosing among the above models is a combination of the macroeconomic environment in each country, existing legal frameworks, cost efficiency considerations and additional variables. Each of the models has distinct legal structures. The legal structures suggest but do not dictate the operational structure. Yet operational structure choices are critical to the ability of the microfinance operation to build upon the advantages of the bank.
The Private Service Company Model, developed by ACCION, is emerging as the most advantageous and often most applicable model and, therefore, warrants further description. ACCION has implemented this model with Banco del Pichincha, the largest bank in Ecuador, Sogebank, the largest bank in Haiti, and ABN AMRO in Brazil. In this model, an established bank sets up a subsidiary to handle microfinance transactions. The service company seeks and identifies borrowers and writes the loans, which are carried on the books of the bank. The service company can draw on some of the established services of the bank, such as back office support, infrastructure, and branding, as well as capital. At the same time, the microfinance unit hires and trains staff in microfinance, removing the administrative burden of managing the microcredit program from the day-to-day responsibilities of the bank.
Introducing microfinance to a commercial bank entails two stages: - Pre-operational stage (10 – 12 months): This work requires an initial stage of analyzing the structure of the commercial bank, increasing their knowledge about microfinance, selecting the most appropriate model to them and negotiating parameters.
- Operational stage (up to 12 months): This stage consists of structuring the microfinance model in the bank and deploying the technical support for the start-up of operations in the following areas:
- Credit methodology, including individual, group and communal bank loans;
- Analysis and re-engineering of credit methodologies, including information processing, credit evaluation, approval processes and branch and central office management structures;
- Management and loan officer training to ensure consistent processes and application of credit policies;
- Human resources management, including establishing personnel policies, compensation and incentive systems, staff development plans, and writing policies, job descriptions and management procedures manuals;
- Developing internal systems and controls;
- Increased operational efficiency by re-engineering processes and/or introduction of cost saving technologies, particularly use of Palm Pilots and credit scoring;
- Piloting and deploying new financial products, particularly housing improvement, rural products and savings;
- Market research and marketing planning to improve customer acquisition, satisfaction and retention;
- Development and implementation of new information technologies.
ACCION will underwrite the success of the new institution in two ways: 1) co-investing in the new institution with the bank in order to share risk; and, 2) pricing technical assistance services in two parts; a fixed fee to cover basic operational cost and a success fee based on the financial results of the project.
Contact Us
For more information about ACCION’s commercial banking services or other technical assistance services, please contact:
ACCION International Headquarters
56 Roland Street, Suite 300
Charlestown, MA 02129
Tel: (617) 625-7080
Fax: (617) 625-7020
Centro ACCION, Latin American Headquarters
Calle 70 A N° 7-81
Bogotá, Colombia
Tel: (571) 607-0700
Fax: (571) 607-0701
|