Jhonny Zambrano is a Credit Analyst at a Microfinance Institution - IMF. He's new to the job. He entered less than a year ago, after finishing University. Accessing work was not difficult. The position did not require previous work experience, due to the shortage of specialized personnel in the field.
For some years, the number of MFIs on the market had grown steadily. Not so the job offer of trained personnel. Situation that had unleashed in the struggle of the different MFIs to attract the few experienced personnel and originated a strong migration from the lower-paid MFIs (mainly, Municipal Savings Banks and Savings and Credit Cooperatives) to the highest-paid entities (mainly, Banks); who preferred this to having to train new staff and take on the mistakes and horrors of their learning curve.
The offerings in the microfinance market were made up of Banks (specialized or through their specialized units), Municipal Savings Banks (CMAC), Rural Savings Banks (CRAC), Financial Companies, Edpymes, Savings and Credit Cooperatives (CAC) and Non-Governmental Organizations (NGO). The competition with each other was very strong. They all basically offered the same products in the same markets, with slight differences in interest rates. The service was the same. Expansion to other markets was still seen as distant. Attention was focused on places with high population concentration and highest economic growth. Few were those who bet on venturing into remote areas of the country, despite the facilities provided by the State through public-private partnerships,that allowed them to use the infrastructure and logistics of the state bank.
In the heat of competition, many MFIs were losing the horizon and venturing into the segments traditionally served by the Bank, affecting their profitability and default ratios. In the first case, because their cost of financial leverage was markedly higher and, in the second, because they did not have the credit technology to evaluate commercial loans. A meager experience was his foray into the real estate sector.
Going back to Juan's case, he was very worried that the end of the month was approaching and he still had not reached his placement goal. His performance had been very uneven in recent months and his job was at risk. As if that were not enough, the competition was not easy. But he remembered that one of his colleagues had told him that he could also place "big" credits. The problem was that Juan only knew how to evaluate loans to microenterprises, which was very different from evaluating “large” loans. But, overall: what did it matter! Everyone used the microenterprise loan template, for any amount of credit! No one had ever said anything! So he kept going.
He decided to attend a business that sells yogurt and juices, which was in the General Regime. He collected the information with the average sales of the last three months and prepared his Worksheet. He did not ask for stations. by the end of the year, nor the states of Situation. Neither did it require a Projected Cash Flow. He presented the operation to the Credit Committee, for the maximum amount allowed without guarantees, for a term of 12 months; and it was approved. Fixed your placement problem.
The detail: the client only paid the first installment. During the collection visit, Juan was surprised that he had almost no merchandise left: it had been sold and the money destined to pay off the debt with suppliers, with whom he kept his home mortgaged.
The mistake, a product of inexperience, was not having realized that the product was on seasonal sale; that coincided with the three months of sales he had analyzed. If I had asked the E.FF. annual and Projected Cash Flow would have been easily realized. Likewise, it did not indicate the debt with suppliers to determine its real working capital.
The teaching of this simple example is to keep in mind that microfinance credit technology was born for small amounts, basically for informal businesses, which were traditionally excluded from traditional banking. Later, with the natural growth of the MFI, the market was expanding and serving more complex and even banking clients; but with the same work template. It continued to grow in shorts. This is not intended to stop serving clients with "large" loans, but rather to adapt credit technology: for each type of credit, the correct technology.
