فینکا افغانسـتان

1. فینکا افغانسـتان قرضه های اسلامی مرابحه قـرضـهـای کـوچـک–تـغـیـرات بـزرگ Networking,Training & Technical Cooperation for Microfinance Growth & Sustainability WORKSHOP “Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul Dr. Mostaq Ahmmed FINCA International-Afghanistan

2. Introduction-FINCA International • FINCA has been operating for over 20 years, having been established in 1984, by Dr. John Hatch. • Dr. John Hatch had conceived a small loan program for low-income farmers that put them in charge. The program allowed them to obtain loans without collateral—their main obstacle to accessing credit—at markup rates they could afford. His program became known as “Village Banking.”

3. Countries where FINCA Operates FINCA Currently Operates in 22 Countries Around the Globe Africa Malawi Uganda Congo Tanzania Zambia Eurasia Azerbaijan Armenia Georgia Kosovo Kyrgyzstan Tajikistan Uzbekistan Russia Latin America Mexico Ecuador Guatemala Nicaragua El Salvador Haiti Honduras Middle East Afghanistan Jordan

4. Financial and Non-Financial Services offered by FINCA International Non-Financial Services • Health Education • Financial Education • Skills/Vocational Training • Networking with other NGOs and organizations Financial Services • Microcredit • SME Loans • Murabaha Loans • Health Insurance • Life Insurance • Savings

5. FINCA Product and Services • FINCA Uganda • Microinsurance: FINCA covers the debt of a dead village bank member, so it does not result in hardship for the family. • FINCA Azerbaijan • SME Loans: FINCA's product offerings have expanded to include larger, individual loans, collateralized by office or specialized equipment, vehicles, or property. • FINCA Malawi • Health Education: FINCA’s network of village banks is used to provide HIV/AIDS prevention education to clients.

6. FINCA-Afghanistan Islamic Microfinance Program The demand for Islamic banking amongst Afghans led FINCA Afghanistan to create Islamic banking products, ever since opening its doors in 2004. Its products were created in consultation with local community leaders and received a fatwa of approval from the famous Islamic Al-Azhar university in Cairo, Egypt. In 2006, FINCA introduced a new line of Murabaha products, in response to its evaluation of local market demands.

7. FINCA’s Interest-Free Loans • Since all FINCA loans are based on Murabaha principles, FINCA does not charge interest, but a markup rate. • FINCA does not charge a fee on borrowed money, rather, it charges a profit margin on goods sold to clients, just like a vendor charges a markup on sold goods.

8. FINCA Afghanistan Statistics Clients: 41,213 Village Banks: 5,529 Portfolio: $8,324,142 Average loan size: $329 Staff members: 387 Clients per CO: 187 PAR: 0.6%

9. FINCA’s Global Statistics

10. Challenging Issues in Microfinance Sector • Microfinance's Mission is to Fight Poverty Worldwide by • Empowering poor people and allowing them to generate income through providing them credit and other financial services • Creating employment, increasing poor people’s income and thus reducing their vulnerability • Among the Future Issues of the Sector, a Key Issue is to Continuously Reach LargeNumber of Poor People in Sustainable Manner Current Challenging Issues Capacity Building Innovation Legal Framework Funding A substantial outreach is a guarantee of efficiency that can play a large part in leveraging funds Outreach

11. Relative Skills Needed for Effective Performance at Different Levels of MFIs Management Top Management Middle CONCEPTUAL HUMAN Management TECHNICAL First-line Management

12. Structural Strength Institutional Planning and Development Working Environment Operational Efficiency Good Communication and Understanding Management Efficiency Training and Technical Cooperation are Prerequisite for Microfinance Growth and Sustainability

13. Summary of Activities & Diagram Targeting Identification of potential customers + Decentralization Close answer to customers need for financial services Products delivery + Head Office Management Team Human Resources Branch Offices Empowerment of the existent human capital Policy & Demand-led Strategy Definition Policy & Strategy Implementation + Marketing Assessment of customers satisfaction and opinion • External Environment • Money Lenders • Other MFIs • Commercial Banks + Standardization Communication Effective circulation of information = • Solutions to Poor People Specific Needs • Increased Outreach

14. Organizational Structure Management Team Policy Making, Strategic Planning and Monitoring Top Management Operations Expansion Human Resources Marketing & Communication Accounts, Audit and Procedure Regional Manager Supervision, Monitoring & Training Middle Management Democratic Structure Standardization & Decentralization Area A Area B Area C Branch Manager Branch Manager Branch Manager Credit Officers Credit Officers Credit Officers Field Level Field Visits Standardized Number of Borrowers

15. Deposit Services Credit Services • Voluntary Savings Services • Mandatory Savings Services • Small Credit • Small Business Credit • Credit for Micro Entreprises MFI’s Products and its Management Products and Services of Microfinance Financial Services Other Financial Services Non Financial Services • Micro-insurance • Life Insurance • Health Insurance • Loan for Housing, Education, Health... • Family Health and Sanitation Education • Financial Education • Micro-entrepreneur Training To Tailor ‘need-based’ Products, Credit Officers & Branch Staff Should be Empowered to Take into Account Clients Suggestions and Complaints

16. Delivery Mechanism The Delivery Mechanism of MFIs Products and Services should be Standardized to Ensure Speed and Efficiency According to Poor People Particular Needs Screening of potential customer by credit officer = socioeconomic survey to ensure borrower’s repayment capacity and business viability Field Level Decentralization of decision making for customer admission -Physical presence of the borrower -At branch office\borrower’s home -Simple forms Loan Disbursement • -Weekly instalments • -Fixed day, time and place • -Limited length • -Physical presence ensured by record of attendance • Geographical proximity • Customer service standards Repayment Procedure & Follow up

17. Key Components of Cost-effective Management Capacity Building Organizational structure Close communication Decentralization Working manual, written guidebook Standardization On the job training Human capital empowerment Marketing tools

18. Need Based Training To Institutional Culture • Training Tools • -Guidebook • -Training Manuels • -Operations Manuels • Interactive courses • Field Training • Discussions… • For new staff members:on-the-job training • About the institution’s strategy and operations • About the MFI’s values and issues (particularly client focus) To Job Skills and Aptitudes • On an ongoing basis • To their general role and daily duties through ‘on-the-job training’ in practical work situation with a close supervision from an experienced employee • To customer service standards (how to create an environment where client feel comfortable voicing his opinion, suggestions and apprehension) • To marketing techniques to assess customer satisfaction and needs • To help customers improve their business

19. Training Content for MF Capacity Building Microfinance Operations 1.Marketing Strategy and Microfinance Clients Targeting Methodology 2.Microfinance Products, Services and Lending Procedures 3.Microfinance Lending Methodology: Individual and Group Lending 4.Microfinance Islamic Lending Methodology 5.Institutional Business Planning for Microfinance Program 6.Financial Planning & Analysis 7.Savings and Credit Management 8.Program Operational Policies and Procedures 9.Accounting and Record Keeping 10.Auditing for Microfinance Operation 11.Management Information System 12. Branch Manager Leadership Training: Managing, Controlling, and Reporting Tools 13.Detection of Fraud and Internal Control 14.Monitoring and Supervision System 15.Delinquencies and its Management Microfinance Training & Capacity Building Methods 16.Microfinance Training Methodology and How to Build Efficient Workforce? 17.Staff Motivation & Built in Cost effective Training Component 18.Human Resource Planning and Development 19. Good Governance

20. Technical Cooperation for Growth & Sustainability Friendly and Flexible Regulation for Microfinance Practices Creating Apex Funding Body and Ressources Mobilisation for OIC Member State Knowledge Hub and Resource Centre Training Institute Exchange Expertise and Best Practices Technology Transformation Green Fielding

21. Why MFIs Need Micro FinanceTraining and Technical Support ? • Maximizing Effeciency • To Standardise and Improve its Services Through the Need Basis Training • Maximum Utilisation of Manpower • To Integrate its Exparts and Training Tools to Managing Growth • To Develop a Cost-effective and User-friendly Methodology for Training and the Use of Technology • To Develop the Professional Expertise Through • Sharing best practices and • Increasing the opportunities to network on a regular basis • Evaluating training activities systematically • Developing a built in training process for human resourse development

22. How Effective Training Can Maximise Efficiency &Reduce Costs ? • Decentralization of Decision Making • Front line agents empowerment in the process of field decision making • Procedure standardization and fund management decentralization • Duties and scope for initiative\decision making clearly explained at each hierarchical level • Optimization of Existent Resources • More responsibilities given to front line agents along with loan repayment task (average client and portfolio per credit officer) • Vehicle for collecting client information and conveying MFI image during group meetings • Close watch over staff turnover rate to prevent departures and related costs • Skills and practice accumulation of staff member thanks to on going training allow promotion • Non Conventional Staff Recruitment • Adapted personal competences ( neither too low, nor too high) • Group interviews and situation tests allowing savings in time and cost reduction • On-the-job training in practical work situation • Close supervision from colleagues and immediate superior

23. THANKS For More Information Please Contact Dr. Mostaq Ahmmed FINCA Afghanistan Microfinance and Development Expert dr_mostaq@yahoo.com