Jaime is surprised by the absolute control that the commercial area has in the decision of approval of the credits that are presented (let's not forget that the opinion of the Risk Unit is not decisive, as in most Microfinance Institutions - IMF).
The credits, according to the amount, follow an approval channel that begins in the Credit Committee, passes through the Group Leader, the Administrator, the Territorial Chief, the Line Head, the Division Manager, until reaching the Management General or Joint Management, as is the case of the Municipal Savings Banks. All this, under the assumption of the existence of a cascade approval, which is not always the case, as we saw in the article “THE VIOLATION OF APPROVAL LEVELS IN MFIs”.
The problem is that all, or almost all, are largely measured by the variation in the placement volume and not by the quality of the portfolio, which implies a neglect of the MFI's long-term sustainability.
Given this reality, some Entities have chosen to implement the CHECK AND BALANCE in the credit process, which consists of dividing the commercial area into two Managements, one that manages growth plans (Credit Management) and another that oversees the process of Portfolio approval and quality (Supervision Management).
For greater detail, the Supervision Management is in charge of approving the preferential rates (always higher than the break-even point) and supervising the Product Headquarters (they do not evaluate or approve credits) and the Credit Officials.
For its part, the Credit Management is the one that defines the growth plans, both for the portfolio and for the branch network, proposes the incentive models for the business team, establishes the goals of each member of the Business team and has charge to the Territorial Heads, Administrators, Group Heads and Analysts.
The novelty of this scheme is the presence and powers of the Credit Officer (or Credit Supervisor), who is physically in each Office, does not report to the Credit Management, but to the Supervision Management and its performance is not measured by the growth of the Office, but for the quality of its portfolio. Likewise, it has a delegation greater than that of the Administrator (which amounts to U $.3,000), which can reach up to $.15,000 (higher amounts are evaluated by the Supervision Management, General Management or the Board, depending on the amount). Likewise, he is responsible for granting exceptions to the Credit Regulations, thereby leaving aside "THE ABUSE OF EXCEPTIONS TO CREDIT REGULATIONS" (see related article).
The weakness of this scheme is that loan approval is slow and does not grow at the desired rate. However, it allows for the growth of a healthy portfolio, which ensures the sustainability of the MFI in the long term: Which Municipal Fund would dare to implement it?. For now, a Rural Bank has already done so.
