1. Page 12 NEWHORIZONS January 2009
Hot topics
Rising competition is the biggest fear for
microfinance insiders because it could hit
profit margins and cause standards to slip,
an industry survey has found.
The biggest fear is that commercial banks
will move into microfinance, according to
the London-based Centre for the Study of
Financial Innovation. A related worry is that
in a saturated market, clients will get more
fickle and repayment morale will worsen.
As part of the study, some 304 microfinance
insiders from 74 countries ranked 29 risks for
the industry. Microfinance insiders reported
management issues as the biggest risks now
but judged them largely well controlled.
Inappropriate regulation and political interference
are seen as very real risks too; in some countries
red tape stops MFIs from transforming into
commercial institutions while elsewhere MFIs
have to go commercial when they would
rather not.
Market challenges such as pressure to lower
loan interest rates, and foreign exchange losses
when being funded in overseas currency also
came up as minor issues. lower interest rates
are deemed a good thing in the long run and
exchange losses are expected to diminish as
MFIs receive more funding in local currencies.
The survey also points to a concern about
unrealistic expectations on microfinance to
reduce poverty causing disappointment and
tarnishing the sector’s reputation.
Respondents ranked too much funding as
a big risk for MFIs that aren’t yet ready to
absorb and deploy capital. Gaps in systems,
technology and staff capabilities may conspire
with easy money to weaken financial discipline,
industry insiders said.
Given these risks, two in three microfinance
insiders said they were optimistic that most
big players will tackle the challenges. One in
four insiders judged MFIs as well prepared.
Microfinance Banana Skins 2008 – Risk in a
booming industry can be downloaded from
the CGAP website:
www.cgap.org/p/site/c/template.rc/1.9.2956
Fears for 2009: banks muscling in
Banks moving into microfinance could hit profit margins and
standards, insider survey reveals
Biggest risks now
1. management quality
2. corporate governance
3. Inappropriate regulation
4. Cost control
5. Staffing
Biggest future risks
1. Competition
2. Staffing
3. Political interference
4. Too much funding
5. Credit risk
Top concerns
1. Competition
2. Cost control
3. Inappropriate regulation
4. Interest rates
5. Credit risk
Ranking microfinance risks

2. January 2009 NEWHORIZONS Page 13
Hot topics
Audits of microfinance institutions often give
too rosy a picture of the health of their loan
portfolios, because auditors are often looking
in the wrong places. The CGAP handbook
‘External audits of microfinance institutions’,
may have been going 10 years, but it’s still a
topical read for ECLOF NEC staff.
The guide points out to auditors and their
clients how microfinance differs from
regulated, commercial banking. For example,
when clients cannot pay back on time, their
loans are often rescheduled. Unless such
loans are flagged as such, such at-risk
repayments can look as though they have
always been on time.
“Audits often do a reasonable job of tracking
the uses of donor funds,” says the handbook’s
foreword. “But [audits] far less often produce
a meaningful picture of the health of an MFI’s
financial service business.”
The handbook explains how to detect
deficiencies in loan portfolios – since this is
where alarming information often lurks. But
the handbook also touches on issues crucial
to long term financial health: how to set aside
enough funds to pay for loan losses and when
to write off loans.
The first volume of the handbook is for partners
or microfinance boards who commission
external audits. The second volume guides
external auditors on how to audit a microfinance
institution.
‘External audits of microfinance
institutions’ – A Handbook, published
by CGAP, Technical Tools Series No. 3,
December 1998, it can be downloaded at:
www.microfinancegateway.org/content
/article/detail/1617
Picture of health?
A CGAP guide for auditors explains how to spot telltale flaws
in a seemingly healthy microfinance loan portfolio
“You will soon come to love living in Geneva,”
a distinguished church leader told me over
lunch. I was surprised. He was the first person
with such an optimistic view since I had arrived
from Zambia CHECK three months ago.
Most people had moaned to me about
Switzerland’s unbearably high cost of living.
So why was he so upbeat about life here?
He explained that it’s much easier to plan
your budget because you don’t have relatives
turning up on your doorstep out of the blue.
Africa has a beautifully inclusive sense of
community. We arrive at each other’s houses
unannounced and can stay as long as we like.
This works very well in rural areas. But not as
families move to the city to earn, such customs
need reviewing.
“Irene, when you are here in Geneva, you can
predict when the next visitor is coming and
you can adjust your budget accordingly,” my
colleague explained. “That is impossible at
home.” Indeed, flights to Switzerland cost
too much for the average African, and then
the Swiss Consulates abroad would need an
invitation letter from me before they would
grant my relative a visa. Voilà – my ample notice.
My first three months in Switzerland is the
longest I’ve gone without one demand or
another on my finances from my extended
family. At this rate, I might even be able to
start saving up!
So this piece kicks off a new series on what
cultural factors deter impoverished people,
especially women, from doing well for
themselves. We’ll also be looking at cultural
triggers for wealth creation.
Send your thoughts and stories to
office@eclof.org and we will incorporate
them into the mix.
Irene Banda Mutalima, Executive Director
Culture clash
When does culture get in the
way of wealth creation? And
conversely when does it help
you get a leg up? Share your
thoughts and stories here

3. Page 14 NEWHORIZONS January 2009
Partnerships
ECLOF Sri Lanka staff are getting upskilled in
institutional development, internal control and
fraud prevention as part of a three-year project
with Norwegian development body the
Stromme Foundation.
The Foundation’s Asian branch is also helping
ECLOF Sri Lanka build capacity, develop
business plans and write a microfinance
operations manual. Stromme Microfinance
Asia has lent the NEC $US 90,000 for loan
capital in 2007-2008. How much Stromme
lends the NEC in the next tranches depends
on what is needed under the business plan.
Gamini Samarasinghe, ECLOF Sri Lanka’s
Programme Manager says such assured loan
capital and technical support are vital in a
competitive market.
“The partnership has instilled in our staff
confidence and strength,” she CHECK said.
Kenya ECLOF has received high praise
from a strategic partner for being open
and trustworthy in its relationships.
The local branch of Heifer Project
International (HPI) was united to take
part in the nitty gritty running of Kenya
ECLOF (KECLOF).
HPI Kenya’s finance chief Douglas
Mwendwa who straddles the KECLOF
board and its Finance, Audit and
Administration Committee, says he
has more confidence in the NEC since
he’s been given first-hand access to
operational figures.
“Inviting partners to sit on critical
committees is a clear testimony of
KECLOF’s openness,” says Douglas.
Douglas was invited to join the board
two years ago. His employer HPI is
a US-based charity that focuses on
livestock and sustainable agriculture
to relieve hunger and poverty.
HPI praises KECLOF for financial ‘openness’
ECLOF Sri Lanka stranger thanks to Stromme
Training gives ECLOF Sri Lanka staff more confidence

4. January 2009 NEWHORIZONS Page 15
Out and about: courses and conferences
ECLOF Philippines’ Eugene Balway with Nobel laureate
Muhammad Yunus
Two ECLOF employees attended the Asia-Pacific Regional
Microcredit Summit, held last July in Bali, Indonesia.
Feraz Legita, Vice-Chairperson of ECLOF Philippines
and Eugene B. Balway, manager of its Benguet branch
both went to workgroup sessions on governance,
microinsurance and doing microfinance in saturated
versus low density, underserved markets.
An online comparison shopper was launched at the
conference. The website MicroFinance Transparency
helps people find the best loan interest rates for them
More than 900 people from 50 countries attended
the summit, which included keynote speeches
from the Indonesian President the former Peruvian
President Alejandro.
Ben Laseko, Director of ECLOF Tanzania, has
attended a summer school in micro banking
run by the Frankfurt School of Finance and
Management. The week-long course covered
change management, risk management, profit
and profitability as well as regulation and
supervision. Ben says the course has helped
him keep up with the dynamic microfinance
sector including the trend for commercialisation.
The Armenian delegation with the president of Mongolia
(in the middle)
A delegation from ECLOF Armenia took part in a
microfinance conference in Mongolia last May. The
Microfinance Centre for Central and Eastern Europe
and the New Independent States ran the conference
for its membership. Over 90 institutions including
ECLOF Armenia belong to the centre.
The 11th Annual Conference, in Ulaanbaatar, Mongolia,
gave microfinance practitioners the chance to exchange
ideas and experiences with each other and meet funding
companies such as the Swiss company Blue Orchard
and the Washington-based Microfinance Information
Exchange (MIX).
Juan Forero and Barbara Doswell from the
secretariat’s operations department have been
learning about opportunities in China. At the
2008 World Microfinance Forum, Juan and
Barbara heard how to unleash the potential of
microfinance This year’s forum was held in
Geneva on 1 and 2 October 2008. The World
Microfinance Forum is a private-public partnership
that promotes inclusive financial markets.
ECLOF news & people
Summer School for Ben Lending in China

5. Page 16 NEWHORIZONS January 2009
ECLOF news & people
Board members of national ECLOFs from
Latin America and the Caribbean got to swap
stories and ideas in July 2008 in a meeting in
the Peruvian Andes.
The meeting, which runs every four years,
was a chance for national ECLOF members to
get their views heard by staff from the inter-
national secretariat in Geneva and representa-
tives from three partner agencies.
Participants met at an altitude of almost 4000
metres on the shores of lake Titicaca in the
Peruvian Andes.
In the little village of Chucuito, close to
the town of Puno, participants discussed
microfinance trends, governance issues and
fundraising. Regional issues raised included
• Strong competition in most of Latin America.
• Government policies: in some countries
NECs have to become regulated entities,
elsewhere populist governments force "social"
business practices on microfinance institutions
or rival them with their own subsidised
microfinance ventures (both of which damage
financial performance).
At the workshop, former Executive Director
Muhungi Kanyoro handed over to his successor
Irene Banda Mutalima. Participants paid tribute
to ECLOF’s transformation during Muhungi’s
16-year tenure including giving National
ECLOFs a bigger say in international decisions.
Irene Mutalima and Martin Kyndt – who had
chaired ECLOF since January 2008 – gave
the participants a glimpse into the forthcoming
round of strategic planning (see also the article
on the Board meeting, page XX). Martin
stressed the need to build ECLOF’s identity,
service, alliances, support and coordination.
Irene reflected on the role of the international
secretariat.
National ECLOFs from Latin America and
the Caribbean talk shop in Peru
Reaching new heights: workshop participants in Peru.

6. January 2009 NEWHORIZONS Page 17
ECLOF news & people
Doing business in the Andes
Workshop participants got to meet clients from ECLOF Peru’s offices
in Puno and the nearby town of Juliaca
Luz Melissa Quispe Quispe, 19, runs a brick factory
Members of various client groups in Juliaca
are organising a little fair for workshop
participants to present their products
– handicrafts, textiles made from alpaca
or sheep, cheese, sweets and more
Juana Nina de Lipa with
Martin Kyndt, ECLOF
International’s chairperson.
Juana weaves rustic
looms with natural and
industrial wool. Her main
products are ponchos,
bed spreads, wall
decorations, and puppets

7. Page 18 NEWHORIZONS January 2009
ECLOF news & people
“My family and I have been
so blessed. One way to
be grateful is by serving
the underprivileged. I'm
honored to serve on
ECLOF's Board.”
Represents: Latin American and Caribbean
National ECLOFs
Other positions: Executive Director of
microfinance and capacity building foundation
Fondación Dominicana de Desaralllo
(Dominican Foundation for Development, FDD).
ECLOF Dominican Republic board-member.
Ada Wiscovitch is a trained political scientist
and economist, She has many years experience
in finance and not-for-profit work, both as a
manager and board-member.
Quote here????
Represents: Churches
Other positions: President and CEO of San
Francisco-based Women’s Funding Network.
(WFN)
Chris has led not-for-profit organisations, in
the United States and elsewhere. Before she
joined WFN, she was Executive Director of the
Chicago Foundation for Women and before that
as Deputy General Secretary of the Lutheran
World Federation in Geneva.
"I will derive unmatched
gratification from knowing
that my advice can imme-
diately impact the lives of
many small farmers in the
most sustainable way."
Represents: North American partner agencies
Other positions: Executive Vice President of
Finance and Administration and Chief Financial
Officer of Heifer International in Little Rock,
Arkansas
James Neal joined Heifer in 2005 and is
leading its finance, human relations, legal,
facilities and IT efforts. Holding degrees in
business administration, finance, accounting
and international economics, James has over
25 years in corporate finance under his belt.
“Im very proud of been
elected to be a part of
ECLOF family! Its a
great honor and an
enormous responsibility.“
Represents: Latin American and Caribbean
National ECLOFs
Other positions: Board member of Fundación
Ecuménica de Desarrollo del Uruguay FEDU
(ECLOF Uruguay). Director of the Centro de
Negocios de la Mujer (center for women’s
businesses) of the Uruguayan Chamber
of Industry
Maria – who has a degree in law – previously
worked on promoting fair trade and developing
small and medium enterprises.
People moves
New Board members
Ada Wiscovitch
Christine Grumm
James Neal
Maria de los Angeles Torres

8. ECLOF news & people
People moves
New Treasurer
"Geneva is becoming a centre
of excellence for responsible
finance and sustainable
development – this is proof
that ECLOF is in the right place."
Represents: Swiss constituency
Other positions: New Treasurer of ECLOF International.
Partner of asset management and corporate finance
firm de Pury Pictet Turrettini & Co. Founding member
and treasurer of not-for-profit body Sustainable Finance
Geneva.
Guillaume’s company is a founding shareholder of
BlueOrchard Finance and fund manager of the Dexia
Micro-Credit Fund.
New people at NECs
Quote here????
Represents: ???????????
Other positions: Succeeding Atty Floyd Lalwet as
President of ECLOF Philippines. Executive Secretary of
the Methodist Evangelical Church of the Philippines and
its Minister of Finance and Administration; sits on the
Membership Committee of the National Council of
Churches
Lingkod was trained as an engineer and has worked for
many years in the life assurance industry.
Quote here????
Represents:???????
Other positions: succeeds Eduardo Gutierrez as the
Executive Director of Asociación Nacional Ecuménica
de Desarrollo ANED (ECLOF Bolivia).
Gerardo has been with ECLOF since 2007 as a National
Manager of Business Operations. Before joining ANED,
Gerardo – who is trained in business and finance – has
most recently been a National Controller at Banco Los
Andes-Procredit Bank in La Paz.
Quote here????
Represents: ??????????
Other positions: Head of Finance and Operations at
Asociación Nacional Ecuménica de Desarrollo ANED
(ECLOF Bolivia
Trained economist Waldo started in banking and soon
specialised in microfinance.
January 2009 NEWHORIZONS Page 19
Guillaume Taylor
Lingkod Maducdoc
Gerardo Mendieta
Waldo Claros

9. Caption??
ECLOF International
P.O. Box 2100
1211 Geneva 2
Switzerland
Telephone: +41 22 791 63 12
Fax: +41 22 710 20 05
Website: www.eclof.org
E-mail: office@eclof.org