Checklist of Sustainability Potentials in Project Credit Interventions

(A) No or Low Potential
(B) High Potential
I. Project Approach and Design/Household Level
  • Overemphasis on credit
  • No demand assessment for FSs a
  • Dependence on external assistance and subsidy
  • High external technical assistance
  • Top down approach without market orientation
  • Without involvement of "beneficiaries"
  • Project long-term hypothetical incremental income
  • high recurrent costs and low or no viability
  • Insincere support and low risk aversion
  • Complex external technology
  • Operating under complex alien norms
  • Without or against legitimate leadership
  • Complex project organization
  • Legal insecurity
  • Mobilization of indigenous financial resources
  • Viability of project interventions at all levels
  • High indigenous human resource mobilization
  • Demand, market and customer orientation
  • Village-based genuine cooperative approach
  • Planned short-term secure incremental income
  • Cost-effectiveness and high viability
  • Professional support and high risk aversion
  • Improved local and appropriate technology
  • Operating under transparent legitimate norms
  • Under legitimate leadership
  • Simple and transparent project organization
  • Legal Security
  • Distinct project M&Eb, control and audit
II. Participating Financial Institution
  • Subsidized, directed and limited services
  • Overburdening of PFIsc through project credit
  • Government-controlled institutions
  • High transaction costs (operations and risks)
  • Low productivity and low motivation
  • Low financial performance (CAMEL) e
  • Lack of cost-effective retailers/intermediaries
  • Credit based on project models
  • Inadequate management information and control
  • Erratic and unprofessional audit
  • Viable and customer-oriented services
  • Capacity adequate participation of FIs d
  • Private sector institutions
  • Low transaction costs (operation and risks)
  • High productivity and high motivation
  • High financial performance (CAMEL)
  • Involvement of cost-effective intermediaries
  • Adequate management information and control
  • Regular and professional audit
III Macro-Policy Environment
  • Insufficient political commitment/responsibility
  • Centrally planned economy
  • Low subsidiarity/centralized decision-making
  • Negative and subsidized interest rates
  • Ineffective regulation and Supervision of FIs
  • Limited government/project accountability
  • Firm political commitment/responsibility
  • Pluralist and market oriented policies
  • High subsidiarity/deregulated political authority
  • Positive and cost-covering interest rates
  • Effective regulation and supervision of FIs
  • Clear government/project accountability

a FS - Financial Services
b M&E - monitoring and evaluation
c PFI - Participating Financial Institution
d FI - Financial Institution
e CAMEL - Capital Adequacy, Asset Structure, Management of Risks, Earnings and Liquidity.

Hartmut Schneider, "Microfinance for the Poor?" Development Centre Seminars. Paris: OECD and IFAD, 1997.

Hari Srinivas -
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