Strategies for Financial Integration: Access to Commercial Debt

This note contains strategies and suggestions to help MFI managers optimize access to commercial debt, as a step in financial integration. The note incorporates two tools that MFIs can use when working with commercial banks - a checklist for financial managers in preparing for a productive dialogue with commercial banks and an outline of a methodology which banks can use in analyzing MFIs.

To facilitate financial integration, MFIs should play a more active role in accessing commercial bank funding. The note suggests that MFIs should:

• Be more proactive in removing regulatory impediments to commercial banks on-lending to the microfinance sector;
• Take a leadership role in introducing a risk analysis format and familiarizing banks with it;
• Proactively market their industry as a high growth and profitable business sector for banks;
• Work towards finding creative, commercial solutions to the problems of foreign exchange risk.

A number of critical factors will determine continued progress in developing commercial bank and capital market access for MFIs in the process of financial integration. A clear action plan for MFIs can include resolution of these issues by engaging with other MFIs and banks, productively and with persistent effort.