|
BancoSol: The challenge of growth for microfinance organizations
Gonzalez-Vega, Claudio & Schreiner, Mark & Meyer, R.L. & Rodriguez, J. & Navajas, S.
Publication Date: 1997
Published by: St. Louis, USA: Microfinance.com
What dangers lie on the path of growth when expanding microfinance operations?
Focuses on difficulties in managing the growth of microfinance organizations and on potential limits to increased efficiency, profitability and sustainability expected from large size. Case study of BancoSol in Bolivia is used to illustrate these issues
Positive effects of growth, like wider outreach, increased sustainability, and growth of assets helping to reduce operating costs, come with dangers: - expanding the portfolio too rapidly can increase loan arrears and losses
- expansion may require lending to riskier borrowers
- when clients are located further from the lender, they cost more to monitor, so expansion can lead to higher costs and reduced monitoring capability
- existing organisational structure and human resource capacity may be inconsistent with large or rapid expansion of operations and lead to deterioration of communication, costly mistakes, and vulnerability to fraud
Another challenge to those managing expanding microfinance operations is avoiding “loan-size creep”, when larger loans go to wealthier clients and depth of outreach decreases. How BancoSol successfully handled such issues is discussed.
The Spanish version of this document can be viewed here
| 
View this Document
Email this Document
