Microfinance Banana Skins 2009 Microfinance Banana Skins 2009 - Le ...

C S F I / New York CSFIMicrofinance Banana Skins 2009Guide to the questionnaireThe Banana Skins questionnaire is designed to find out how people see the risksfacing the microfinance sector over the medium term. The sector is defined asmicrofinance institutions (MFIs) which operate for profit and have assets of at leastUS$5 million.In Question 1, we ask you to describe in your own words what your concerns aboutthe risks facing MFIs over the next 2-3 years, and the challenges they will have tomeet to sustain continued profitable growth. Please identify geographies or MFItypes which you feel face particular risks.In Question 2, we ask you to score a list of potential “Banana Skins” by the severityof the risk on a scale of 1 to 5, and whether you see this risk as rising, steady, orfalling (please mark R,S or F). There is space for you to add brief comments, forexample about particular countries, markets or MFI types. An explanation of thevarious Banana Skins follows.1. Back office operations. How vulnerable are MFIs to risks inadministration, accounting, systems and controls?2. Competition. Competitive pressures in microfinance are mountingwith the proliferation of MFIs, new entrants and unregulatedinstitutions. Will these push MFIs to take greater risks in areas such aspricing, product innovation and credit quality?3. Corporate governance. Are there weaknesses in the corporategovernance of MFIs which could damage the business, for examplebecause of a lack of independence, low calibre, or a failure to bring infresh blood?4. Credit risk. Will MFIs be damaged by borrowers failing to repay theirloans?5. Depositor confidence. How safe are MFIs from the risk of a run ontheir deposits and funding?6. Foreign currency. Many MFIs fund themselves in foreign currency,creating foreign exchange risk. Is this a risk they can manage?7. Fraud. Will MFIs be damaged by dishonest staff and customers?8. Funding – too little. Can MFIs maintain their access to funding fortheir lending activities, particularly those which are not in the depositgatheringside?9. Funding – too much. Is the problem of funding that MFIs have morefunds than they can prudently employ for loans?10. Inappropriate regulation. Will rules imposed by regulators constrainor damage the growth of MFIs by failing to offer an appropriateregime?CSFI / New York CSFI E-mail: info@csfi.org.uk Web: www.csfi.org.uk 41