Case Studies

Weathering the Storm – White Paper on Microfinance Crisis Survival for MFI’s

Last week the Center For Financial Inclusion released a white paper called Weathering the Storm authored by Daniel Rozas.

The white paper maps out the ways in which MFI’s most commonly get in trouble and offers a blueprint for sound management and crisis control for Microfinance Institutions. The study has been sponsored by Calmeadow, Deutsche Bank and Credit Suisse .

weathering storm white paper microfinance

Weathering the Storm

Right click on the file at the link below and choose “Save Target As” or “Save Link As”

Weathering The Storm- White Paper-PDF-44-pages-1.8MB

Introduction

The years 2009-2010 were a watershed for the microfinance industry, with many MFIs experiencing serious downturns for the first time. Dealing with this was challenging, and MFIs found themselves devising solutions on the fly – some successfully, others less so. Yet they had no choice. Available literature on microfinance crises was sparse and dealt with market-level failures rather than MFI-specific ones and only a handful of MFI-level case studies existed.There were no best practices or compendiums of case studies available that could provide guidance on managing MFIs in crisis.

In the absence of such guidance, practitioners had to rely on their own wits. The results have been varied, but what has been uniformly true is that those directly involved with recent crises have emerged from the experience with knowledge that had previously only been available to a handful of veterans.

After all, along with the pain, crises carry the most densely packed learning available, stamped forever in the memories of their accidental pupils. However, those still untouched by crisis have not had such benefit, and even the veterans themselves have only witnessed their own battles, not those of others. Only a very select few have had the opportunity to glimpse the inner operations of multiple MFIs as they navigated through their storms.

This paper is an opportunity to do just that, and in the process, learn the valuable lessons that until now have been available only to those who happened to be on deck. And while we cannot assure that those lessons will be as memorable as experiencing them directly, we do guarantee that the learning process will be far less hazardous.

The seven case studies and three short overviews of MFIs included here describe the different paths that can lead to crisis. Some MFIs took the road of reckless growth, others wandered in through weak operations and internal controls, and still others were undone by government action or serious economic downturns. In each case, the MFI faced existential threats. Some parried the threats successfully and survived. Others succumbed and are no longer with us. All left their lessons behind.

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