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MICROFINANCE PAPER WRAP-UP: Microfinance and the Role of Policies and Procedures in Saturated Markets and During Periods of Fast Growth, by Adrian Gonzalez and Emmanuelle Javoy, published by, Microfinance Information Exchange, Planet Rating

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Internal procedures and policies as well as external factors are important determinants of the portfolio quality of microfinance institutions [MFIs]. This paper aims to assess the effects of internal factors such as governance, management information systems [MIS], risk management procedures and lending methods in different scenarios.

In particular the authors consider how internal factors interact with external factors such as market saturation and MFI growth rates. Questions such as the following are addressed: “Is governance more important in periods of accelerated growth than in periods of contraction?” and “Are MIS more critical in highly saturated markets?” The authors employ data from approximately 200 ratings of 130 MFIs by Planet Rating of France.

The ratings employ a methodology known as GIRAFE, an acronym for the following six assessment domains: governance, information, risk management, activities, funding and liquidity, and efficiency and profitability.

The authors use the following indicators of credit risk.....

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