Towards Good Practice Principles for Microfinance in War-affected Contexts

This discussion document aims to contribute to debate among donors, non-government organizations (NGOs), microfinance institutions (MFIs) and microfinance clients on a common standard for microfinance in war-affected contexts.

The paper states that:

• In war-affected contexts, microfinance providers need to conform to international donor guidelines;
• Following best practice principles can contribute to outreach and viability;
• The conditions peculiar to war-affected contexts necessitate additional good practice standards.

The document sets out standards for MFIs, relating to:

• Institutional strengths, such as:
  • Strong security systems;
  • Sustainable service delivery;
  • Investment in staff and client capacities;
  • A philosophy of independence;
  • Accurate management information systems (MIS);
  • Transparent financial reporting.
• Quality of services, such as:
  • A strong repayment discipline;
  • An effective client targeting strategy;
  • Smaller loans with flexible repayments.
• Outreach and financial performance, which include:
• An appropriate pricing policy;
• Sound portfolio quality;
• Planned profitability;
• Strong internal control systems.

The document also sets out standards for donors, relating to:

• Appropriate uses of grants;
• Appropriate uses of loans;
• Commercial sourcing of funds;
• Coherence of donor policies.