SETTING UP POOR PEOPLE FOR LIFE 11: Credit Methodology

Credit methodology lies at the heart of microfinance and its quality is one of the most determinant factors for the efficiency, impact and profitability of a microfinance institution (MFI). Credit methodology is comprised of a host of activities involved in lending including sales, client selection and screening, the application and approval process, repayment monitoring, and delinquency and portfolio management. It is also linked to the institutional structure and human resource policies such as hiring, training and compensating staff. Getting the credit methodology and product mix right is therefore one of the most demanding as well as rewarding challenges MFIs face. Since issuing the first microloan in 1973 in Brazil, ACCION and its partner MFIs have continued to develop and improve credit methodologies. Over the years, ACCION has developed know-how and expertise in a broad range of products for both rural and urban markets.

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