Appraisal guide for microfinance institutions: a technical guide

Appraisal guide for microfinance institutions: a technical guide

What areas should be covered in MFI appraisals?

This document presents an appraisal guide incorporating the latest microfinance knowledge and best practices to help analysts evaluate microfinance institutions (MFIs). The guide is particularly aimed at funders and consultants who analyse the MFIs, however others such as commercial banks or investors may also find it useful.

The authors have structured this guide in the outline form of a complete appraisal report. This involves eight separate stages as follows:

recommendations - succinctly state whether funding is recommended based on a summary of key factors and any mitigating circumstances
overview - summarises the MFI’s vision and mission, organisational strengths and weaknesses, and macroeconomic, political, and other external factors
• institution - describes the MFI’s ownership and governance, organisational structure, regulation and supervision, management, external relationships, and external auditing
products - analyses the MFI’s voluntary savings, lending, and financial and non-financial products.
social performance - assessing how well the MFI translates its social goals into practice, looking at systems, outreach, and potential for achieving impact
loan portfolio quality - how the MFI measures, monitors, and manages its loan portfolio, including delinquency and write-offs
financial performance and risk management - analysis of the MFI’s financial performance, risk management, and financial ratios
business planning - evaluation of the MFI’s strategic and business planning processes and financial projections are factors involved at this stage.