Certified Expert in Microfinance

Unit 0 focuses on two topics. First, it gives a brief introduction to the world of microfinance by providing a general view of the United Nations’ Agenda 2030 of Sustainable Development Goals. From a practical perspective and based on empirical evidence, this chapter will show how financial inclusion has been recognized as an enabler to reduce poverty and improve economic and social development.

Based on that information a bridge is built to the microfinance sector, its fundamentals, financial inclusion and how this can help reduce poverty by offering greater access to financial services. Second, this unit provides the basics about poverty, the world's bottom billion, poverty trends and how poverty is measured. This will be a great foundation to analyze the survival problems of the world’s poorest, how they generate income and the importance of the informal sector in daily life. 

Based on the knowledge gained in Unit 1, this unit derives more details about the microfinance sector, its history, its structures, and its players. Microfinance has evolved rapidly in the last decades; however, its way of providing access to finance to people excluded from the traditional financial sector is not entirely new. An introduction to the history of microfinance and its way to financial inclusion are explained. This part is complemented by introducing the trendy sub-topics of digital finance, agrifinance, green finance, refugee microfinance, women’s financial inclusion, MSME finance, and non-financial services. 

It also provides facts about the first microfinance institutions, their origins, their development, and the rise of new funding instruments. You will learn about the microfinance industry's main actors, whether formal or informal, how diverse they are, and the advantages and disadvantages of different microfinance approaches.  

We will explain the role of debt and capital raising in achieving greater levels of financial inclusion. You will get to know that the commercialization of microfinance drives new challenges for MFIs not only related to the trade-offs between social and financial performance but also to their model of doing business.  

Additionally, regional differences of the microfinance market and microfinance institutions will be discussed as well as the impact of the COVID-19 pandemic and the resilience of microfinance. Eventually, the unit is concluded by having an outlook on the development of the microfinance sector, its players, and their role in poverty reduction. 

Unit 2 presents an overview of the services that help foster financial inclusion in different ways. It starts with two highly successful products, micro loans and micro savings. Both products were initially regarded with skepticism as many finance professionals did not believe that poor people could repay loans or had any money to save. Real life experience has shown that both credit and savings have enjoyed a great uptake and continue on a growth trajectory. 

You will find out all about the diversity of credit products that are available today and why it is important to continue to innovate. Regarding savings, you will learn what kind of products have been popular with people who are happy to transition from informal savings methods (like small livestock or jewelry) to a more formal setting if the products are designed in a way that meets their needs. The unit discusses everything related to savings both from the clients’ and the MFIs’ perspectives. You will also learn about the prerequisites MFIs need to fulfil to become a deposit-taking institution and which factors should be taken into account when making the decision to offer savings, especially regarding the inherent risks and the ways they can be managed. 

The unit will also acquaint you with micro insurance and the different products offered to the same target segment MFIs cater to. The range of these products is broad and Unit 3 will familiarize you with the most important ones. 

Finally, the unit will also look into other services that are useful for microfinance borrowers, like payments they need to make to suppliers, remittances and money transfers (domestically and internationally) as well as digital financial services that have changed the potential for financial inclusion dramatically over the last years. In addition to all these different financial services, you will also learn about non-financial services MFIs can offer to help their borrowers thrive and prosper. 

Microfinance has become an important tool for poverty alleviation and economic development in many countries. Microfinance institutions provide small loans, savings, insurance and other financial services to low-income individuals who are often excluded from traditional banking system. Unit 4 will provide you with a detailed introduction to the two methodologies commonly used to deliver micro loans, group lending and individual lending. While both aim to provide access to credit to those who need it most, there are significant differences between them. 

Generally speaking, a group of borrowers is jointly responsible for repaying a loan in group lending. Group members are required to meet regularly to ensure everybody pays on time. If one member defaults, the others are liable for the loan. Individual lending, on the other hand, comes with more flexibility in terms of loan size and tenor depending on the availability of collateral. In this context, unconventional forms of collateral play an outsized role since they help borrowers without traditional assets to access financing anyway and grow their business. 

This unit will examine the characteristics of both lending approaches and point out the differences between them, e.g. the concept of joint liability vs. individual liability and the role of social cohesion and mutual support as opposed to individual accountability. We will then move on to discuss the advantages and disadvantages of each methodology regarding availability of collateral, the possibility to build an individual credit history, cost of monitoring and risk of default. 

After completing this unit you will have an understanding of the key feature of each methodology and you will be enabled to decide whether offering group or individual loans is more suitable to the characteristics of the communities your institution works in. 

In this unit, you will learn everything about managing microlending operations. It focuses on the entire loan cycle from start to finish: promoting the products and creating a meaningful credit application that provides the loan officer with all the information needed for the initial client screening process. It will further shed light on the in-depth client assessment from visiting the business site and interviewing the client to a character assessment, a business analysis and financial analysis and, finally, determining the right amount and repayment schedule for a loan by calculating cash flows. The role of the credit committee in the final step of the loan approval will also be explored. When going through each of these steps in great details, we will discuss all of the tasks and duties of a loan officer to ensure high-quality credit decisions. We will explain how to perform a reliable in-depth analysis of a micro business.  

There are also different ways of disbursing a loan which we will look at, and, naturally, the process does not stop here. After disbursement, regular monitoring is required to ensure that the business is functioning like it is supposed to and that the loan has been invested in the way stated on the initial application. Loan monitoring will be explained in great depth and breadth with a set of practical tips to support loan officers in their daily work, because it is much easier to prevent loan delinquency than to resolve it! 

We will then turn to the question of how to deal with delinquent loans. What are the special skills a loan officer needs to enable strong delinquency management? Recommendations and practical solutions for handling difficult clients top off this chapter. 

Finally, the unit will also go into agricultural loans, because they have certain specifics that require an adjusted lending methodology.  The unit provides guidance on product and delivery mechanisms that have been successful in the practical application. 

Unit 5 examines the major aspects of MFI performance: the financial return, the social return and the environmental return. It is important to understand how to measure these three different types of performance and how to use this information for sound management decisions since most microfinance institutions are already shifting their focus from the double to the triple bottom line. A multitude of practical examples and exercises put the necessary flesh on these dry bones. 

After an overview of what performance and sustainability mean in microfinance you will learn how the third bottom line, environmental performance, factors into the system more and more. The unit will also provide you with a detailed understanding of how to measure financial performance based on income statements, balance sheets and loan portfolio reports. Various financial ratios and explanations of how to interpret them will be presented to you and you will get an introduction to the CAMELS rating system for Microfinance Institutions.  

Additionally, the unit covers profitability management with different product costing and product pricing methods, because they are closely connected to social performance. After all, product affordability plays a great role in achieving financial inclusion. Finally, Unit 6 covers the latest aspects of social and environment performance management. Various performance indicators, as well as issues related to responsible finance, social/environmental audits, social/environmental ratings and social/environmental performance reporting, are presented. The last chapter deals with debt and equity funding, which is necessary for growth - a prerequisite for increasing financial, social and environmental performance. A number of funding instruments and the required due diligence processes are presented. 

Risk Management is one of the fundamental responsibilities of all financial institutions and Microfinance Institutions are no exception. The Board of an MFI must determine the risk appetite and tolerance of the organization and communicate this clearly to stake holders at all levels. The unit on Risk Management will provide you with the knowledge and the tools you need to implement your institution’s risk policy. You will learn about the essential risks to MFIs: financial risk with its subcategories liquidity risk, credit risk, market risk (comprising interest rate risk and foreign exchange risk), and capital adequacy risk; and operational risk including people risk (human error, moral hazard, fraud), organisational risk, systems risk (failing systems), external events risk, and legal and compliance risk. 

In addition to teaching you all about the risks associated with the operations of an MFI, the unit will also equip you with the most proven tools and resources to mitigate and control these risks. After completing it you will be able to differentiate between risk types; calculate and interpret relevant indicators to measure and monitor your institution’s risk exposure; and you will be familiar with the key instruments used to keep the specific risks under control so your MFI can thrive in the long term. 

This unit will introduce the importance of managing a microfinance institution beyond its financial and social performance. Most MFIs started being managed with a social goal, but as MFIs grow, scale up and transform, good governance practices become fundamental for institutional success. Hence, understanding how an MFI is directed and managed is one of the key topics of this unit.  

Additionally, the staff is considered the biggest asset of an MFI. An MFI that is able to have motivated, well-trained, well-informed staff has a big advantage in a competitive environment. At the same time, microfinance is a sector where change happens often and continuously. Thus, it is relevant to take a more careful look at bonus systems as a way to create motivation and thereafter move into HR Management and the strategic parts of HR. HR is also about how to ensure that the right people are in the right place, and a successful training programme constitutes one of the major strengths of an MFI. 

A successful MFI manages to target the right clients and offers them the right products. This unit provides insights into marketing and market research as well as how to identify your market potential and market needs in a structured way, as well as the strengths of your MFI in comparison to your competitors. The unit further looks at marketing activities with a specific focus on microfinance marketing measures. 

Microfinance is, at its core, about providing financial services to the poor. A significant part of this unit is therefore Customer Relationship Management, focusing on how to ensure that your MFI is service-minded and successful in providing services to your clients in a client-friendly manner. 

Water, Sanitation and Hygiene (WASH)

Mobile Money and Digital Financial Services