European Microfinance Conference 2009 Microfinance and its growth in Europe: Consequences, challenges, opportunities Workshop: “The governance of Microfinance.

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  • European Microfinance Conference 2009Microfinance and its growth in Europe: Consequences, challenges, opportunities

    Workshop: The governance of Microfinance Organizations in Europe: a Motor or a Brake for growth?Christian Baron June 2009

  • Gret, Cerise Who are we ?A French development NGO, Projects Implementation / Short Term Expertise / Public Policy / Diffusion of referencesWorking Experiences in more than 40 developing countries90 employees and volunteers in France and abroadSix thematic departments, among them a Microfinance and Small Enterprise Department involved in Microfinance, Micro insurance and BDS activitiesPromotion and support to MFIs that have been institutionalized as Limited Companies (Cambodia, Mexico, Mauritania, Madagascar)www.gret.org to know more about usMember of Cerise, a French Microfinance Network that has worked on MFIs Governance in 2003/2005

  • Main Lessons from Cerise work on Governance

    Handbook for the analysis of the governance of MFIshttp://www.cerise-microfinance.org/ http://www.cerise-microfinance.org/pdf/En/handbook_analisis_governance_mfi.pdf

  • From Shareholders to StakeholdersGovernance is not only related to the Board of Directors or to the relationship between BoD and shareholders a stakeholder analysis is necessaryStakeholders : owners, directors, staff, partners, technical service providers, clients (borrowers and depositors), etc.There is no one-fit-all governance solutionDysfunctions and crisis may be a good source of learning to assess the governance of an MFI

  • Three main questionsWhatever is the choice regarding the legal status and the governance system, there are three main questions to raise :Who has the decision making power among the stakeholders ?How is this power exercised ?How are problems and crisis dealt with ?

  • The foundation for a good governance Six fundamental elements

    A shared strategic vision among all stakeholdersA reliable and timely MISA clear well adapted and coherent decision making processPresence of adequate trainings and skillsAn efficient monitoring systemAn effective crisis prevention and management

  • A shared strategic vision among all stakeholders

    Explicit strategic vision (target public, products and services, geographical outreach, etc.)Strategic vision formalized in founding textsStrategic vision consistent in founding texts and business planStrategic vision understood and shared by all the stakeholders (elected people, staff, etc.)Strategic vision coherent with the institutional context

  • A reliable and timely MISInformation is complete at all levels of the institution (Field level HQ BoD GA + Central Banks + lenders + etc.)Availability of portfolio and financial indicators (how long does it take to get the information ?)Quality and reliability of the MISAccessibility of the informationUse of information in the decision- making

  • Clear, well-adapted and coherent decision making processFormalized decision making process in manuals of procedures (preparation decision implementation control)Coherency between the formal decision making process and the real oneCoherence between the stakeholders and the level of decision-makingPrevention and good management of conflict of interestsAccountability of decision makers

  • Adequate trainings and skillsCoherence between training / specialization and responsibilities heldExistence of an internal training programExistence of incentives / disincentives for executing decisionsCoherency between technical / financial means available and institutional strategy Ability to execute decision without external assistance

  • An efficient monitoring systemClearly defined monitoring chainWidespread understanding of the monitoring chain by all stakeholdersAbility to detect problems and anticipate risks Independent, competent and regular auditsAvailability of monitoring and auditing reports (written documents)

  • Effective crisis prevention and managementInternal capacity to detect problems (ICS and Internal Audit)Efficient warning system (time between beginning of a problem and its discovery)Ability to react quickly and proportionally (time between discovery and reaction)Existence of a response planAbility to modify rules and procedures

  • Some other lessons learntGovernance and access to financial resources Lenders need to understand the governance of an MFI and to be sure that it works wellGovernance and staff policy the incentive system may play a role to strengthen the governance depending on the criteria that are used to appraise the performance of the staff (ex : ICS)Governance and social performance a SP assessment and monitoring system is a useful toolGovernance and crisis a good governance system may not allow to avoid crisis but to solve themEvolution of the governance / Evolution of the MFI good governance is a permanent challenge

    **Personnal skills: Technical service provider for member based and client based MFIs / director of MFIs

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