Micro finance Group assignment: Maximum weight =12.

5%,

Last submission date: 04/02/2014 E.C

1. Liabilities and equity provide the source of funds for an institution’s assets. What are the
possible sources of funding for a loan portfolio, the most important asset, in an MFI?
2. As the single largest income-producing asset, the portfolio is at the heart of MFI income
generation. What are the major factors influencing portfolio size, and what are the challenges
posed by acting on each of these factors?
3. Seeds of Growth (Seeds) are a multi-purpose NGO whose mission is to support the income
generating potential of local entrepreneurial women in a quickly growing peri-urban
neighborhood of the capital of a certain country. Seeds offer business development services
and microcredit. As most of its clients are illiterate, it also holds mandatory literacy classes
for them. Seeds receive funding in grants from a variety of sources, including a regional
development bank, a local foundation, and the local delegation of a nationwide economic
development program. Income from Seeds’ portfolio does not cover all its day-to-day
operating expenses, and it’s headquarter staff invest a lot of time in proposal writing to secure
new funding for the on-going operations. With just this available information, at what level of
financial viability would you place Seeds? Why? What costs would Seeds of Growth have to
cover in order become operationally self-sufficient?

4. Explain the potentail tradeoffs between some MFIs perfomance indictors. How do you
reconcile the conflicting objectves of sustainabilty, outreach and growth of MFIs.

5. What are the potential costs of delinquency to a borrower? What are the potential benefits?
What are the costs of on-time payment? What are the benefits? In your answer, consider more
than just financial costs/benefits.

6. Operational self-sufficiency is often referred to as reaching the ‘break-even’ point for an

institution. Its earnings from its portfolio and other investments cover the day-to-day cash
costs, as well certain other non-cash expenses. Which of the following elements would
operational self-sufficiency cover, and why? Which ones would it not cover, and why?

i
  Annual depreciation on branch office computers
 Loan loss provision expense
 Salary of the loan officer
 Interest expense on commercial loan
 Cost of inflation on equity

7. List at least 30 micro finance well established in Ethiopia?

ii