MFI partners of UNCDF-UNDP project in Nepal receive positive rating
  • January 11, 2012

In this quarter, EAFS project completed a rating activity of 10 Strategic Partners. EAFS received and shared the final reports with the partnering institutions, as well as organized one day workshop to discuss the findings and support partners in development of a way forward based on these recommendations.   

The rating was conducted by M-CRIL - an international rating agency based in India. M-CRIL rating framework focused on assessment and rating of three areas of microfinance operations: Governance and Strategy, Management Systems and Financial Performance. 

As a whole EAFS’ strategic partners received positive ratings, the analysis however, highlighted some common issues facing all partnering institutions. All MFIs in Nepal for example, still rely on manual Management Information Systems (MIS) and while computerization is in progress this may take up to three years to come fully into place.   

Another common challenge facing the Nepalese microfinance industry  consists in the similarity among loan, savings and insurance products offered by different MFIs, thus not creating healthy competition for the clients. Moreover, M-CRIL’s rating found that most clients use only two general loans products, despite the availability of a broader range of products. This suggests that  there is generally a lack of awareness among clients about products and services whereby they use only what they know  about.  

Based on the findings the rating agency made recommendations for the partners and microfinance industry as a whole. Implementation of computerized MIS was recognized as a priority, since current MIS not only is error prone, but also proves to be inadequate to provide key reports for management decisions. Furthermore this process will reduce operating expenses while improving client relationship.  Secondly, there is a need for refinement and diversification of products, ensuring both competition among MFIs and range of choice for clients. Client knowledge on the other hand, has to be strengthened building up their financial capability and awareness.  

EAFS project started to closely review recommendations both for the industry as a whole and for individual partners.    It is important to highlight  the recommendations made,  as these impact directly the future success of the institutions as well as the users of financial services. These recommendations will be incorporated in future technical assistance interventions of the project.