1. Presented by
Shankar Man Shrestha
CEO, RMDC
Nepal

2. Current Environment of Microfinance
 Microfinance is established as a glorious phenomenon all
over the world
 Globally 135 million poor families have been benefitted
from microfinance services
 The world community has a great expectation from it
 There was substantial evidences of microfinance being an
effective tool of poverty alleviation
 It has been proved as a sustainable operation
Continue…

3.  The efforts of MC Summit Campaign and Nobel Laureate
Prof. Mohammad Yunus have made a great contribution to
taking it to a remarkable height and get it popularized all
over the world
 In about 13 years, the outreach of microfinance has grown
18 folds
 A huge funds of governments and non government and
private agencies have been mobilized to support
microfinance and related activities
Continue…

4.  MF has got professionalized and has been a centre of
attraction for almost all kinds of people from all walks of
life such as academics, researchers, elites, practitioners,
investors, philanthropist
 However, lately questions have been raised on the
effectiveness of microfinance operations in achieving social
mission and the integrity of practitioners
 In many countries, microfinance practitioners are being
criticized as the blood suckers, shylocks, exploiter,
opportunists and so on specially after Andra episode in
India

5. Emerging Challenges
 Mission drift - moving away from the poor.
 Too much commercialization
 Multiple financing by MFIs
 Over indebtedness / misuse of resources
 Board governance getting aloof from social mission
 Practitioners are motivated towards making more and more profit
 Increased social distortions among clients
Continue…

6.  Borrowers getting displaced from their native places for
their failure to repay loans
 Lending as well as reputation risks are on increase
 MFIs following irresponsible practices
 Degradation of portfolio quality
 Increasing drop out of clients from program
 Deteriorating staff behaviour
 Widening gap between poor and rich

7. Reasons Behind the Problems
 Lack of clients orientation and sensitization on over indebtedness and the
risk involved
 Lack of knowledge about clients
 Deviation from best practices norms and adoption of irresponsible practice
 Negating essentials of microfinance
 Lust for power and money
 Irresponsible policy and management
 Inadequate staff orientation and training on social mission
Continue…

8.  Poor communication of MFIs officials with local community
 Lack of self regulation as well as external regualtion
 Discarding best practices norms
 Board members’ failure to understand the underlying principles of
microfinance
 Over ambition of private investors
 Overriding of social mission and responsibility
 Inclusion of non-poor

9. Way Forward for BoD and Investors
BoD should strongly come up with commitment for
social mission and undertaking following actions:-
 Have a CEO with commitment to achieve social mission
and financial sustainability
 Design MF policy strictly targeted at the poor and
vulnerable
 Orientate staff on serving the poor and the vulnerable
Continue…

10.  Design loan size suited to the needs and capacity of
the poor
 Stop multiple financing
 Promote financial literacy among clients
 Encourage Savings from Clients
 Serve graduated clients differently commensurating
with their increasing need and capacity
Continue…

11.  Visit clients to know them well
 Organize public audit in program areas for assessing
impact and feedback from community
 Employing self regulation for achieving social as well as
financial missions

12. Thank You !