Checklist of Sustainability Potentials in Project Credit Interventions

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&E^b, control and audit

II. Participating Financial Institution

Subsidized, directed and limited services
Overburdening of PFIs^c 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.

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

Hari Srinivas - hsrinivas@gdrc.org
Return to the Microfinance Governance Page
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(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&E^b, control and audit
II. Participating Financial Institution
Subsidized, directed and limited services Overburdening of PFIs^c 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