The Microfinance Handbook:
An Institutional and Financial Perspective

Sustainable Banking with the Poor, World Bank

The Microfinance Handbook, one of the major products of the World Bank's Sustainable Banking with the Poor project, gathers and presents up-to-date knowledge directly or indirectly contributed by leading experts in the field of microfinance. It is intended as a comprehensive source for donors, policymakers, and practitioners, as it covers in depth both matters pertaining to the policy framework, and the essential components of institutional capacity building?product design, performance measuring and monitoring, and management of microfinance institutions.

The purpose of this handbook is to bring together in a single source guiding principles and tools that will promote sustainable microfinance and create viable institutions. Organization of the Book Part I ?Issues in Microfinance Provision? addresses the broader considerations of microfinance activities, including the supply of and demand for financial services, the products and services that a microfinance institution (MFI) might offer, and the institutions and institutional issues involved. Part I is the least technical part of the Handbook; it requires no formal background in microfinance or financial theory.

Part II, 'Designing and Monitoring Financial Products and Services' narrows its focus to the provision of financial intermediation, taking a more technical approach and moving progressively toward more specific (or micro) issues. It provides information on the design of financial services (both lending and savings products) and the development of management information systems. It will be of most interest to practitioners who are developing, modifying, or refining their financial products or systems and donors or consultants who are evaluating microfinance organizations and the appropriateness of the products and services they provide or monitor. Part II incorporates some basic financial theory, accordingly, readers should have a basic understanding of financial management.

Part III provides tools for evaluating the financial health of an MFI and managing operational issues. Its purpose is to improve the level of financial understanding and management in MFI operations. As the most technical section of the handbook, it will be of particular interest to practitioners and consultants. However, as donors come to understand both the complexity of microfinance, and that it can be delivered in a financially sustainable manner, knowledge of the more technical aspects of microfinance will become increasingly important to them in deciding whether to support institutions and programs. Donors will also benefit from part III if they want to understand how MFIs should be adjusting their financial statements and calculating performance indicators.

Each chapter is designed to be used alone or in conjunction with other chapters, depending on the specific needs of the reader. A list of sources and additional reading material is provided at the end of each chapter.


Chapter 1 - The Country Context provides a framework for analyzing contextual factors. It focuses on issues that affect the supply of microfinance, including financial sector policies and legal enforcement, regulation and supervision, and economic and social policies.

Chapter 2 - ?The Target Market and Impact Analysis,? looks at the demand for financial services among low-income populations and presents ways of identifying a target market based on client characteristics and the types of enterprises they operate. It also discusses impact analysis and how the desired impact affects an MFI?s choice of target market.

Chapter 3 - ?Products and Services,? considers the services that low-income entrepreneurs might demand, including: financial and social intermediation, enterprise development, and social services. An overview of well-known microfinance approaches is presented in the appendix.

Chapter 4 - The Institution discusses the various types of institutions that can effectively provide and manage the provision of microfinance activities. It addresses legal structures, governance and institutional capacity, and also provides information on accessing capital markets for funding.


Chapter 5 - Designing Lending Products provides information on how to design or modify lending products for microentrepreneurs both to meet their needs and to ensure financial sustainability of the MFI.

Chapter 6 - Designing Savings Products provides information on the legal requirements to provide savings, types of savings products, and operational considerations including pricing. This chapter focuses on the provision of voluntary, not compulsory, savings services.

Chapter 7 - Management Information Systems presents an overview of effective MIS, including accounting systems, loan tracking systems, and client impact tracking systems. It also provides a summary evaluation of existing software packages.


Chapter 8 - Adjusting Financial Statements presents the adjustments to financial statements that are required to account for loan losses, depreciation, accrued interest, inflation and subsidies.

Chapter 9 - Performance Indicators details how to measure and evaluate the financial performance of the MFI, focusing on ratio analysis. In addition, it provides various outreach indicators that can be monitored.

Chapter 10 - Performance Management presents ways to improve the financial and resource management of microfinance institutions. It discusses delinquency management, staff productivity and incentives, and risk management, including asset and liability management.

To order the "The Microfinance Handbook" contact -
Phone: (703) 661-1580 / Fax: (703) 661-1501 / E-mail:
Mail: The World Bank, P.O. Box 960, Herndon, VA 20172-0960, U.S.A.

Contact Address
The Foundation for Development Cooperation (FDC)
PO Box 10445 Adelaide Street
Brisbane Queensland 4000 Australia
Tel:+61 (7) 3236 4633
Fax:+61 (7) 3236 4696

Hari Srinivas -
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