Identifying Promising MFIs

This paper presented at the Global Microfinance Meeting on Young and Promising MFIs that was held from May 30 to June 1, 2001, at the United Nations in New York discusses characteristics considered important for the success of MFIs.

The author makes the following observations:

• Good indicators of MFI’s capacity to grow are its present ability to:
  • Increase its stockholders' equity and its assets;
  • Attract skilled staff while maintaining or increasing its profitability.
• Scaled-up, or transformed MFIs, may have one of three different forms of ownership:
  • Financial company owned by private shareholders;
  • Financial institution owned by a mix of shareholders including the state;
  • Mutual cooperative in which the owners are also the clients.
• MFIs need a sufficiently large capital base to survive or grow.

The paper concludes that promising MFIs that have reached an adequate level of institutional development are able to:

• Produce a good auto-diagnosis of their financial and organizational situation;
• Pay sufficient institutional capacity to design and implement policies to address weaknesses identified in the diagnosis.