MICRA Model:

Presented by: Meynar Sihombing, CEO-MICRA Indonesia MICRA, the Microfinance Innovation Center for Resources and Alternatives, is an Indonesian foundation focused solely on microfinance. MICRA’s mission is to build the institutional strength and outreach of the Indonesian microfinance sector, by providing a full range of high-quality, best-practice technical inputs and support to all industry stakeholders, in a sustainable and demand-driven manner. As an independent support center, MICRA is committed to promoting innovations, transparency, increased outreach to the poor and ever-improving performance in the microfinance industry. MICRA was founded by Mercy Corps in early 2006 to institutionalize its joint “Commercial Linkages Pilot Project” with IFC PENSA, and also based on Mercy Corps’ four-year experience supporting a large network of MFIs throughout Indonesia MICRA’s headquarter offices are located in Jakarta. In August 2006, MICRA opened its first branch office in Banda Aceh. MICRA currently includes six technical units, as illustrated below:

MICRA Institutional Capacity MICRA currently have a staff of 32, including leading microfinance practitioners, commercial bankers, professional accountants and auditors. MICRA staff have received assistance by three expatriate microfinance experts funded by MICRA, Mercy Corps and other strategic partners. Expatriates provide technical input for all units, as well support in the areas of strategic planning, operations, public relations and finance. Staffing is illustrated in the following organizational chart:

ManagementInformation

Systems

Management

Information

Systems

MICRAMICRA

Technical

Assistance

Technical

Assistance

Ratings & Appraisals

Ratings & Appraisals

Financial ServicesFinancial Services Research &

Innovations

Research &

Innovations

NetworkingNetworking

Since its inception in early 2006, MICRA has already engaged in numerous projects on behalf of a number of institutions, including the following:

World Bank: Performance of two original research studies, including: 1) extent and quality of microfinance reaching youth in Indonesia, with policy recommendations for future work; and 2) evaluation of government credit line to support microenterprise aquafarmers in support of world Bank credit line. Adaptation of training materials in support of national financial literacy survey. CGAP: Conducting training of trainers of CGAP Delinquency Management and Financial Analysis trainings for PNM, Mercy Corps and IFC participants. Course adaptation, translation and dissemination of CGAP technical materials. IFC PENSA: Development of rating tool and commercial linkages pilot project, including ratings, technical assistance and financial services. Rollout of CGAP standard training to leading MFIs. GTZ: Performance of ratings, technical assistance, MIS consultancy and research in Aceh and Yogjakarta with BPR and BPRS. Design and rollout of 10 training courses, focusing on Syariah microbanking, in cooperation with Syiah Kuala University, support development of mini lab in order to introduce MicroBanker system to professors, lectures and constructor assistants of Syiah Kuala University.

ILO: Performance of ratings and training needs assessment with Syariah cooperatives in Aceh, as well as technical assistance to credit unions in Nias. DAI/USAID: Performance of ratings, technical assistance, research and training needs assessment in Aceh with Syariah cooperatives.

Development Innovations Group: New product development research and pilot testing in area of microhousing finance. Citigroup Foundation/FDC: Organization of Citigroup trainings in Indonesia, related to microfinance and disaster management, quality management and branch management. ImagiNations: Conducted research on youth in microfinance and rating of prospective MFI partner. InWent: Organization of study tours, Syariah training, microbanking laboratory preparation, loan officer training and other technical inputs in Aceh, Medan and Java.

Mercy Corps Aceh: Performance of ratings, research and technical assistance for BPR, cooperatives and Baitul Quirodt throughout NAD. Mercy Corps Indonesia: Performance of ratings, financial services, research, technical assistance for BPR, cooperatives and BMT following the earthquake. Microfinance Opportunities: Official Indonesian partner for training and dissemination of MO/Citibank Financial Literacy training. Multiple MFIs: Provision of technical assistance to BPR, foundations, cooperatives and BMT in Java, Bali and Aceh Province. SBFIC: Training of BPD Aceh account officers in microfinance loan product implementation, analysis, execution, monitoring and control. ADB: Training, mentoring, and technical assistance services to Bank BPD Aceh fro Commercial Microfinance pilot project and Grassroots Microfinance. HIVOS/AMFITIL: Training for MFIs under the Association for MFI in Timor Leste Swiss Contact: assessment and development of guidelines for the ACCESS tool/concept for credit union and TOT for implementation. FAO/ADB: Implementation of the FAO-GTZ MicroBanking System (MBWin) in 15 Community Bank in Aceh.

MICRA Technical Units

Ratings and Appraisals

MICRA performs specialized MFI appraisals and ratings on behalf of MFIs, donors, investors, commercial banks and government. These services provide independent expert evaluation and verification of individual MFI performance, based on international microfinance best practice and Indonesian commercial banking reporting norms. The unit’s four main services, include:

1) Desk Reviews of MFI Performance; 2) MFI Appraisals (1 to 2 field days, without portfolio or financial audit); 3) Technical Assistance Needs Assessments; and 4) Ratings (3 to 5 field days, including audit and development of “Investor Report”).

The PRIME rating tool, appraisal tool and Investor Report were developed by MICRA staff and IFC PENSA specifically for the Indonesian market over the course of the Commercial Linkages Pilot Project. The tools are based on national and international standards, providing information for the national banking industry, as well as international investors. MICRA has performed 46 Full Assessment or Rating 46 and 105 Limited Review.

Technical Assistance

MICRA’s technical assistance department includes five full time trainers who are among the leading Indonesian trainers in microfinance, as well as a strong group of additional MICRA trainers working in other units (research & innovations, networking and branch operations) and contract trainers and consultants who provide additional expertise, as needed. Trainers are certified in the full range of CGAP microfinance trainings, as well as Citibank Foundation training materials in both Bahasa Indonesia and English. MICRA has its own body of internal trainings and consulting materials, based on best-practice standards. MICRA trainers and consultants have practical experience managing the full range of microfinance institutions, from foundations to cooperatives and BPR. They are assisted by Mercy Corps international training specialists in microfinance, who bring over 30 years international microfinance technical capacity building expertise. The MICRA technical assistance unit engages in the following activities:

1. direct delivery of technical assistance services, including training, consulting, on-the job-training, etc., to MFIs;

2. development and introduction of best-practice training and consulting tools (in cooperation with the Research and Innovation Unit);

3. intensive training of trainers and consultants to ensure broad dissemination of materials throughout Indonesia at affordable cost for MFIs; and

4. delivery of technical services to large scale audiences through MICRA networking events, including conferences and workshops.

Over the past year and a half, the MICRA technical assistance unit has provided consulting assignments, formal trainings and workshops and “Train the Trainers” for more than 100 MFIs and other industry stakeholders. These technical assistance inputs have been conducted on behalf all legal forms of microfinance institutions, including BPR and Syariah BPR, foundations, cooperatives, credit unions, BMT and Baitul Qiradh. See Annexes for a full listing of MICRA trainings. MICRA technical assistance is tailored to the needs of each client, often based on the detailed findings of PRIME ratings. MICRA incorporates follow-on mentoring and practical hands-on training with its formal training deliveries, to assist with implementation of new skills and ideas. MICRA consulting is oriented around building sustainable client skills and abilities, rather than performing work on their behalf and

leaving the institutional internal capacity unchanged. More than 1000 participants has been served through MICRA’s training and consultancy.

Research and Innovations

MICRA’s Research and Innovations Unit addresses critical development needs of the Indonesian microfinance sector by conducting social and market research and developing and disseminating information on innovative practices and tools. This unit engages in the following activities:

1. original research in microfinance for MFIs, donors and other parties in areas such as market and impact assessments, as well as general studies in microfinance;

2. identifying, refining, testing, packaging and disseminating relevant innovations in microfinance for the sector;

3. cooperating with the Technical Assistance Unit to develop and adapt existing training materials and practical tools oriented around market demand, incorporating innovations and best-practice materials;

4. creating performance benchmarks for MFIs in Indonesia, based on rating results and intensive TA experience with a range of MFIs;

5. maintaining microfinance resources centers at all MICRA offices and including key publications in the MICRA web site.

To date, this department has already engaged in a range of projects, including:

� An original study on Youth and Microfinance, which examined provision of microfinance to youth in a range of MFIs and demand for microfinance services among youth in five provinces, on behalf of the World Bank;

� A client demand survey of a Baitul Quiradh in Banda Aceh, using the MicroSave Africa tools, on behalf of USAID;

� A survey of MIS programs used by leading MFIs and their feedback on performance, on behalf of Mercy Corps and GTZ;

� A market survey for microhousing loans in Yogjakarta, following the earthquake, on behalf of Mercy Corps;

� An evaluation of the preliminary impacts and implementation of a Ministry of Fisheries credit line to support micro aqua-farmers, on behalf of the World Bank. This research formed the basis of a $100 million World Bank loan to the GOI.

Networking

The Networking Unit’s role is to promote transparency, best practice information dissemination and lateral learning through networking forum around Indonesia and internationally. MICRA actively cooperates with national and international stakeholders, including PNM, IFC, CGAP, BRR, Gema PKM, PINBUK, Asbisindo and Perbarindo to promote information sharing and dialogue through publications, conferences, workshops, etc. The Networking Unit maintains the MICRA web site and publications, with the goal of wide-spread dissemination of technical information. The Networking Unit is also the lead unit involved in developing and implementing the marketing strategy for MICRA. Currently, the Networking unit has an agreement to translate and

disseminate CGAP publications in Indonesia. The Networking unit will take the lead on implementation of the Microfinance Innovations Academy for Indonesia (MIAI).

Financial Services

The role of the Financial Services unit is to serve as a facilitator of financing for bankable MFIs. Over the past year and a half, based on the PRIME Rating Tool and the Investor Report, MICRA management and staff have developed partnerships with a range of Indonesian commercial banks, including BCA, Danamon, BII, Niaga, Bumiputra, Bukopin, Bank Shinta and the state-owned microfinance apex institution, PNM. The Financial Services Unit has facilitated loans to MFIs from BCA, PNM, BNI and the Cordaid Foundation. This unit also provides limited direct financial services for MFIs in post-disaster environments, including Yogjakarta. The unit manages the MICRA loan guarantee facility, which is used to provide a partial cash guarantee for commercial loans to rated MFIs. MICRA’s funding role is to fill small, critical gaps quickly and promote a better flow of funds from existing sources, rather than to displace commercial banks or other funding institutions.

Management Information Systems (MIS)

MICRA’s newest technical unit focuses solely on MIS for microfinance institutions. Based on the findings and recommendations of a joint GTZ-Mercy Corps study of management information systems for MFIs conducted in September, 2006, MICRA has decided to become an authorized vendor of the MicroBanking System for Windows (MBWin – also commonly known as MicroBanker). MicroBanker is one of the world’s leading integrated MIS packages for microfinance institutions. The software is currently available in Bahasa Indonesia and meetings all Bank Indonesia reporting requirements. MICRA’s MIS unit will be responsible for marketing, installing and providing technical support for MicroBanker in Indonesia.

MICRA Challenges:

• MICRA Institutional Development, • Building a sustainable market, • Balancing between missions and sustaining the institution financially.