Jaime has received a new document: the Levels of Approval of the Microfinance Institution - IMF. The aforementioned document indicates the approval autonomies by hierarchical level. For example, the maximum amount to be approved by the Group Manager ($.5,000), the Administrator ($.15,000), the Territorial Manager ($.35,000), the Line Manager ($.70,000), the Division Manager ($.120,000) and so on, until reaching the General Management. With the exception that to reach the higher levels you must have the authorization of the lower levels.
However, you have seen that the cascade approval levels are not necessarily met. For example: if a Line Manager does not want to authorize a credit operation, they can jump to Division Management. It is worth saying what will happen in the future, with those who do not "accompany" the credit.
Likewise, it has found that many times, credit operations are "pre-approved" by higher levels, who then "instruct" their subordinates to endorse them.
In all this “approval” scheme, the Risk Unit is a stone guest. He has no deciding opinion. It's just one more line. Worse if it is staff not properly trained.
Situations such as those described by Jaime are common to appreciate in some Savings and Credit Cooperatives - CAC and MFIs that have public sector shareholders. In the first case, due to the absence of direct control by the Supervisory Body and in the second, because managerial positions sometimes have a political component, which requires maintaining party “loyalties”.
In the precise case of some CACs, the situation could be classified as extreme, since the Boards of Directors are renewed by thirds each year, often involving changes in the management staff, who to stay in their positions, accept unethically, the interference of managers in credit decisions.
In the case of the Municipal Savings Banks, many elect their management staff with technical criteria, but sometimes they tend to give in to media pressure from politicians and truncate processes started with serious damage to the MFI itself.
Fortunately, the above is not the common denominator in the companies of the Financial System. In the majority, respect for the Autonomies table is one of the bases of their success. Furthermore, the delegation of powers is usually to the person not in charge and among the people themselves, the amount is usually differentiated, considering that risk management is not the same among all.
In the case of the Risk Unit, its opinion is decisive and its personnel highly qualified and from the business areas. They apply the appropriate credit technology for each type of credit. They issue sector reports that support the credit decision of Credit analysts and train staff for a better risk assessment.
