Financial Performance Monitoring: A Guide for Board Members of Microfinance Institutions
This paper presents a tool for microfinance institutions (MFIs) board members to aid them in understanding the role of financial performance monitoring as part of governance. The manual also introduces the key elements of monitoring financial performance.
The paper describes the various steps involved in a performance monitoring system for MFIs:
- Strategic planning, including the mission and long-term plans for the institution;
- Operational Planning and Budgeting for periodic evaluations;
- Managing risks involved in MFI operation and planning for them;
- Managing assessment and accountability;
- Evaluating the existing reporting or monitoring systems;
- Comprehending the financial implications of MFI size, age, and legal status.
The paper explains the analysis of financial documents such as balance sheet, income statement, cash flow statement, various financial ratios and projections.
The paper also presents an elementary management information system framework for standardized flow of information between the MFI board and the operational staff. It concludes by comparing the existing monitoring systems and by providing a preliminary guideline for financial monitoring.
The author annexes practical exercises for understanding concepts such as break-even analysis
