It is with heavy hearts that we share the very sad news that John Lwande, Program Director of the Africa Board Fellowship Program (ABF) and our dear friend and colleague, passed away earlier this week following a brave battle with cancer.

John had been a part of CFI for the past five years, a part of Accion since 2008, and an important contributor to inclusive finance since the 1980s.

John’s leadership of <a href="https://www.centerforfinancialinclusion.org/about/what-we-do/africa-board-fellowship-program/">ABF</a> over the past five years led to it becoming sub-Saharan Africa’s preeminent peer learning program for financial institutions. The nearly 300 Fellows who have graduated from the program represent 75 financial institutions that serve more than seven million clients – and each of them has benefitted from John’s leadership. Many of them regarded him as a mentor.

Not only was John a valued member of the CFI team, he was an important contributor to Accion’s work in Africa. Joining Accion in 2008, John’s first role was as the seconded Managing Director to Tanzania’s Akiba Commercial Bank. He helped Akiba address and overcome a variety of challenges and grow to reach tens of thousands of Tanzania’s families and small businesses. Akiba flourished under John’s management. Following his time with Akiba, John was an integral part of Accion’s Africa regional management team, serving on boards, and always handling challenging situations with a calm head. Stretching back in his career, John played a leading role in the transformation of Tanzania’s National Microfinance Bank, and served for several years in key positions at FINCA. He began his career at Kenya Rural Enterprise Program, one of the very first pioneering microfinance organizations in East Africa.

John’s enormously important contributions to the sector always took the form of building financial institutions that perform well, a job that involves sustained hard work, often with little public recognition. Those of us who have worked with John can attest to the difference he made.

John leaves behind a wonderful family legacy of his wife and four children. We are grateful to them for sharing John with us, and send our deepest sympathies for their loss.

For us, John was not only a wonderful colleague but a very special person who manifested the qualities that we most admire: patience, leadership, good judgement, and a larger than life personality with an unforgettable laugh and broad smile for everyone. He was passionate about his work, committed to the goal of building a strong Africa, and he had a most positive outlook on life. He knew how to lead teams and to be part of a team. All of us at CFI will miss him terribly, and we are committed to keeping his spirit alive, especially in our work in Africa.

In Praise of John Lwande

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<div class="sc-bwzfXH ejJzIl"><article class="jsx-1739195141 text-block__article">Africa Board Fellowship (ABF) program participants convene in Cape Town, South Africa, to close out the program’s 9th cohort.

The ABF seminars are an interactive combination of guided discussion and peer-to-peer exchange on governance best practices and risk-management strategies, with an emphasis on fellows sharing knowledge and experience.

World-class experts and leaders in microfinance and financial inclusion will facilitate and engage participants in active dialogues. The aim of the Africa Board Fellowship program is to connect board members and CEOs through peer learning and exchange to strengthen the governance of financial institutions serving low-income clients in sub-Saharan Africa.

Research has shown that the single biggest success factor in MFIs across the world is good governance. Program activities, structure, and content have been carefully designed to create an open atmosphere that allows for frank discussion among peers. Fellows identify their objectives for the program and then work with a program advisor on achieving those goals. Additionally, Fellows have access throughout the program to a participant-led virtual collaboration space with tools, resources, content, and access to subject-matter experts. At the conclusion of the program, Fellows stay connected as alumni, providing a network of leaders confronting similar challenges.

<a href="https://www.centerforfinancialinclusion.org/about/what-we-do/africa-board-fellowship-program/">Learn more</a> about the program.

</article></div>
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</div>

Africa Board Fellowship Closing Seminar – Cohort 9

<strong>WASHINGTON, DC, February, 12, 2019</strong> – The Center for Financial Inclusion at Accion (CFI) and the <a href="https://www.citigroup.com/citi/foundation/">Citi Foundation</a> announced a new partnership to strengthen financial institutions specializing in reaching underserved communities in emerging markets. The Citi Foundation is providing $1.2 million in funding to support the three-year initiative.

“Our partnership with the Center for Financial Inclusion at Accion will help develop and strengthen the next generation of financial inclusion leaders who in turn will accelerate financial inclusion and economic progress for families and communities across the world,” said Florencia Spangaro, Director of Programs, Citi Foundation.

Through peer-to-peer learning and executive education programs, CFI builds organizational and human capacity around the globe to deepen and sustain financial inclusion. Its programs include the <a href="/about/what-we-do/hbs-accion-program-on-strategic-leadership-in-inclusive-finance/">Harvard Business School (HBS)-Accion Program in Strategic Leadership in Inclusive Finance</a> (SLIF), an intensive week-long course providing management and leadership training to those shaping the microfinance industry; and the <a href="/about/what-we-do/africa-board-fellowship-program/">Africa Board Fellowship Program</a> (ABF), a governance focused six-month peer learning and exchange program for board members and executives of African financial institutions serving low-income clients. Citi Foundation funding will support both programs, supporting scholarships for HBS-Accion SLIF participants who demonstrate financial need and supporting the optimization and expansion of ABF.

“We are grateful to the Citi Foundation for recognizing the importance of investing in leaders who are working on-the-ground toward financial inclusion,” said <a href="/bio/deborah-drake">Deborah Drake</a>, Vice President, CFI, and head of the governance portfolio. “ABF and HBS-Accion SLIF alumni gain useful skills and knowledge, particularly around governance issues, as well as new relationships and strong networks that they can use immediately and draw on over time.”
<p style="text-align: left">Additionally, the Citi Foundation’s support will contribute to the launch of a new global executive education program to help C-suite leaders and board members of financial institutions effectively and sustainably serve underserved communities. Arriving in fall 2019, with seminars in Asia and Africa, this new program will focus on governance, risk management, growth, client centricity and other mission-critical issues.</p>

<p style="text-align: center"><strong>### </strong>

<strong>About the Center for Financial Inclusion at Accion</strong>
The Center for Financial Inclusion at Accion (CFI) is an action-oriented think tank that engages and challenges the industry to better serve, protect, and empower clients. We develop insights, advocate on behalf of clients, and collaborate with stakeholders to achieve a comprehensive vision for financial inclusion. We are dedicated to enabling 3 billion people who are left out of – or poorly served by – the financial sector to improve their lives.
<a href="https://www.centerforfinancialinclusion.org">www.centerforfinancialinclusion.org</a>
<a href="https://twitter.com/CFI_Accion">@CFI_Accion</a>

<strong>About the Citi Foundation </strong>
The Citi Foundation works to promote economic progress and improve the lives of people in low-income communities around the world. We invest in efforts that increase financial inclusion, catalyze job opportunities for youth, and reimagine approaches to building economically vibrant cities. The Citi Foundation's "More than Philanthropy" approach leverages the enormous expertise of Citi and its people to fulfill our mission and drive thought leadership and innovation. For more information, visit <a href="https://www.citigroup.com/citi/foundation/">www.citifoundation.com</a>.

<p style="text-align: center"><strong>### </strong>

MEDIA CONTACT

Center for Financial Inclusion at Accion
<a href="/bio/virginia-moore">Virginia Moore</a>
vmoore@accion.org
+1 202.393.5113

The Center for Financial Inclusion at Accion and the Citi Foundation Announce Partnership to Strengthen and Expand Executive Leadership in the Financial Inclusion Sector

Africa Board Fellowship (ABF) program participants convene in Cape Town, South Africa, to kick off the program's 9th cohort.

The ABF seminars are an interactive combination of guided discussion and peer-to-peer exchange on governance best practices and risk-management strategies, with an emphasis on fellows sharing knowledge and experience.

World-class experts and leaders in microfinance and financial inclusion will facilitate and engage participants in active dialogues. The aim of the Africa Board Fellowship program is to connect board members and CEOs through peer learning and exchange to strengthen the governance of financial institutions serving low-income clients in sub-Saharan Africa.

Research has shown that the single biggest success factor in MFIs across the world is good governance. Program activities, structure, and content have been carefully designed to create an open atmosphere that allows for frank discussion among peers. Fellows identify their objectives for the programme and then work with a program advisor on achieving those goals. Additionally, Fellows have access throughout the program to a participant-led virtual collaboration space with tools, resources, content, and access to subject-matter experts. At the conclusion of the program, Fellows stay connected as alumni, providing a network of leaders confronting similar challenges.

<a href="https://www.centerforfinancialinclusion.org/about/what-we-do/africa-board-fellowship-program/">Learn more</a> about the program.

Africa Board Fellowship Opening Seminar - Cohort 9

Africa Board Fellowship (ABF) program participants convene in Cape Town, South Africa, to close out the program's 8th cohort.

The ABF seminars are an interactive combination of guided discussion and peer-to-peer exchange on governance best practices and risk-management strategies, with an emphasis on fellows sharing knowledge and experience.

World-class experts and leaders in microfinance and financial inclusion will facilitate and engage participants in active dialogues. The aim of the Africa Board Fellowship program is to connect board members and CEOs through peer learning and exchange to strengthen the governance of financial institutions serving low-income clients in sub-Saharan Africa.

Research has shown that the single biggest success factor in MFIs across the world is good governance. Program activities, structure, and content have been carefully designed to create an open atmosphere that allows for frank discussion among peers. Fellows identify their objectives for the programme and then work with a program advisor on achieving those goals. Additionally, Fellows have access throughout the program to a participant-led virtual collaboration space with tools, resources, content, and access to subject-matter experts. At the conclusion of the program, Fellows stay connected as alumni, providing a network of leaders confronting similar challenges.

<a href="https://www.centerforfinancialinclusion.org/about/what-we-do/africa-board-fellowship-program/">Learn more</a> about the program.

Africa Board Fellowship Closing Seminar - Cohort 8

This virtual dialogue provides an opportunity for the <a href="/about/what-we-do/africa-board-fellowship-program/">Africa Board Fellowship</a> (ABF) network and <a href="/about/what-we-do/fiec/">Financial Inclusion Equity Council</a> (FIEC) members to discuss the role disruptive technologies play in advancing financial inclusion. This dialogue will also provide opportunities for peer exchange on investment evaluation and which technology solutions have the potential to be the most disruptive.

<strong>Discussion Topics:</strong>
<ul>
 	<li>The theme of financial inclusion week is “getting inclusion right”. What role do disruptive technologies have in advancing that agenda?</li>
 	<li>What are the most innovative and disruptive technologies that you are seeing in the FI sector?</li>
 	<li>Are there technologies from other sector that we should be watching/following?</li>
 	<li>How can investors evaluate different technologies for financial inclusion? What criteria to you use to assess which technology solutions have the potential to be the most disruptive?</li>
</ul>
<strong>Featuring:</strong>
<ul>
 	<li>Wayne Hennessy-Barrett, CEO, 4G Capital, ABF Fellow</li>
 	<li>Ami Dalal, Managing Director, FINCA Ventures, FIEC Member</li>
</ul>
<strong>Moderator:</strong>
<ul>
 	<li><a href="/bio/danielle-piskadlo">Danielle Piskadlo</a>, Director, Investing in Inclusive Finance, CFI</li>
</ul>
&nbsp;

&nbsp;

Webinar: Disruptive Technologies Advancing Financial Inclusion

The eight cohort of the Africa Board Fellowship (ABF) program convenes in Cape Town, South Africa for its opening seminar on October 17-19th 2018, followed by a closing seminar for the seventh cohort (October 22-24).

The seminars will be an interactive combination of guided discussion and peer-to-peer exchange on governance best practices and risk-management strategies, with an emphasis on fellows sharing knowledge and experience.

World-class experts and leaders in microfinance and financial inclusion will facilitate and engage participants in active dialogues. The aim of the Africa Board Fellowship program is to connect board members and CEOs through peer learning and exchange to strengthen the governance of financial institutions serving low-income clients in sub-Saharan Africa.

&nbsp;

Africa Board Fellowship Seminars October 2018

The Africa Board Fellowship Program connects board members and CEOs through peer learning and exchange to strengthen the governance of financial institutions serving low-income clients. It's not your average corporate training. One aspect of our peer learning and exchange model are these graphic harvests, which help fellows visualize the governance and risk concepts discussed during in-person seminars.

Africa Board Fellowship Graphic Harvest

<h1>Challenge</h1>
In emerging markets across Africa, microfinance institutions (MFIs) and other financial service providers (FSPs) play a critical role providing financial services to people who are unable to obtain traditional finance. Despite its important role, this sector in Africa faces enormous challenges. In 2013, our <a href="https://www.centerforfinancialinclusion.org/microfinance-banana-skins-2014-the-csfi-survey-of-microfinance-risk/">survey of African FSPs</a> revealed governance and risk management as the primary vulnerabilities in the sector. Weak governance and risky behavior also <a href="http://www.cgap.org/publications/growth-and-vulnerabilities-microfinance">played a role in microfinance crises</a> in Nicaragua, Morocco, Bosnia-Herzegovina, and Pakistan. CFI decided to commit to helping African FSPs focus on governance and risk—and not just individually, but at a sectoral level—to avoid this fate.
<h1>Navigating Obstacles</h1>
We quickly realized we would be starting nearly from scratch. The handful of existing governance resources on the market at the time comprised generic, one-off trainings or were geared to corporate participants. We knew that this kind of classroom-based, lecture-heavy, training was not an effective strategy for senior board members, whose time was valuable and who were often in positions of authority in other walks of life.

We wanted to create something meaningful and effective, tailor-made for FSPs, and delivered in a manner that would stick with participants so that they could lead their organizations and their industry to grow and prosper.

&nbsp;

Governance Peer Learning and Exchange Program Strengthens Financial Institutions in Africa

In this Seminar, you will learn the following topic areas:
<h2>Board Responsibility &amp; Dynamics</h2>
<strong>Problem Statement:</strong> The greatest governance challenge highlighted in the interviews conducted by Accion was a lack of appreciation for the role of the board.  As one respondent shared, “too many people are on boards for perks and prestige, and don’t feel responsible for or committed to the organization”. The mismatch between Director skillsets and the needs of the institution, little understanding of role or responsibilities, putting individual interests before those of the institution, and limited accountability has drastically impacted many boards’ ability to think strategically, provide oversight and bring about positive change.  Even when some of these features are in place, Board dynamics are often a deterrent to good governance, stressing the need for boards to have a good composition, capable and experienced leadership, strong understanding of board responsibilities and sound foundation of governance structures and best practices.
<h3>Program Objectives:</h3>
<ol>
 	<li>Clearly understand board and CEO responsibilities and authority to the company, to investors, to management, and to other stakeholders</li>
 	<li>Recognize the importance of the board, regularly and explicitly discussing its role, understanding its responsibility for solvency, strategy and double-bottom line mission, and succession planning</li>
 	<li>Apply practical techniques for navigating factions and power dynamics. Understand principles for balancing the board-executive relationship, how the board’s role in setting strategy interacts with management’s role in execution, how to consider execution risks, and how to monitor and provide guidance to management as the agreed strategy is implemented</li>
 	<li>Understand in concept the conflict of interests that board members and CEOs may face</li>
</ol>
<h2>Strategy and Managing Sustainable Growth</h2>
<strong>Problem Statement:</strong> While growth is essential for any business, reaching scale is particularly important for MFIs targeting a low-income population to achieve their social goals and reach financial sustainability. One of a board’s most important roles is helping guide management in setting the strategic direction for the institution to implement smart growth. MFIs can face tremendous pressure to achieve excessive growth targets from many angles – whether it is a matter of survival for young institutions, management’s ambition to be the market leader or excessive profit expectations from investors – yet often don’t have the capacity to support rapid growth. Often boards lack the capacity to properly assess strategic options available in a rapidly changing environment. On a board dynamics level, it can be hard for board members to challenge rapid growth plans presented by CEOs with successful track records and supported by interested lenders and investors. As a result, the microfinance industry has seen numerous cases of “darling institutions” growing very quickly and then facing a serious portfolio crisis or even imploding as a result.  Boards need to understand the risk factors of aggressive growth trajectories to inform their decisions on strategy and know how to monitor the execution of the growth plan and identify “early warning indicators” to ensure controls and systems are robust and effective, and “mid-course” corrections can be implemented in a timely fashion.
<h3>Program Objectives:</h3>
<ol>
 	<li>  Identify the strategy development processes and best practices of boards that have made successful strategic choices to establish the “10 year view”</li>
 	<li>Analyze both internal capacity – specifically the risks and stresses associated with building staffing for growth – and external environmental challenges in setting growth strategy</li>
 	<li>  Recognize risks of rapid growth, identify “early warning signs” of unsustainable growth and understand why some traditional indicators (like PAR 30) may be lagging indicators</li>
</ol>
<h2>Client Centricity</h2>
<strong>Problem Statement:</strong> Linkage with clients is a core function of effective governance—both to ensure products are responsive to client needs and aspirations as well as to ensure clients are treated fairly and transparently. While there are MFI boards that intentionally create client linkages and channels for the client voice to be heard (client visits, focus groups, grievance mechanisms, client representation etc.), these MFIs are the exception rather than the rule. Boards need to recognize the value in a client-centric business approach and know how to utilize channels and tools to understand and be attuned to their clients.
<h3>   Program Objectives:</h3>
<ol>
 	<li>Understand client centricity and the board’s role in driving a client centric strategy that incorporates client protection principles</li>
 	<li>Recognize the business-case benefits of listening to clients early in the strategic development process through capturing client feedback to inform product development and reporting</li>
 	<li>Identify available tools both for understanding clients and for social performance management</li>
 	<li>Identify methods to incorporate the client voice in board conversation.</li>
</ol>

ABF Closing Seminar Spring 2018

Deborah Drake

Elisabeth Rhyne

Lizzy Bolze

Danielle Piskadlo

Paul DiLeo

Alexis Beggs Olsen

Sub-Saharan Africa

Ethiopia

Zambia

South Sudan

Zimbabwe

Mozambique

Nigeria

Uganda

Financial Service Providers

Fintechs

Governance

Microfinance Institutions

Risk Management

Challenges and Crises

Enabling Environment

Equity Investing

Financial Technology

Impact Investing

Trends

Microfinance

Resilience

Policy, Regulation and Government Initiatives

Blog Post

Event

Press Release

Webinar

Video

Case Study

Africa Board Fellowship Program

In this Seminar you will learn the following topic areas:
<h2>Risk Management</h2>
<strong>Problem Statement:</strong> The board is responsible for setting the tone at the top for an institution’s risk appetite. However, many MFI boards take a reactive role in responding to risk, reacting to risk management issues rather than proactively approving policies and risk limits which reflect the risk appetite of the institution. Instead of proactively address risk in a holistic nature by identifying and planning for risk management improvement within the business planning process, institutions often focus on some risk areas (liquidity, credit, etc.) and not others (strategic, reputational, etc.), not properly understanding the interrelated nature of the risks themselves. Boards have a large job and precious little time to do it. Lack of a proper understanding of the strategic nature and technical elements of risk management can cause a temptation to rely too heavily on estimates generated by risk measurement systems and tools (if they exist), rather than fully understanding and using their business judgment to challenge the underlying assumptions. Board dynamics issues can also pose serious threats to effective risk governance.

To govern risk well, board members need to: 1) establish and communicate a clear and transparent institutional risk appetite, 2) ensure formal and systematic risk management and monitoring tools are being applied and functioning properly, and 3) establish formal and systematic reporting channels which can ensure risk management information is reviewed, understood, and acted on by both board and senior management, and 4) develop the intangibles for good risk management.
<h3>Program Objectives:</h3>
<ul>
 	<li>Understand the components of a comprehensive risk management framework for MFIs and the interrelatedness of these components</li>
 	<li>Understand the concept of risk appetite, including the setting and monitoring of an institution’s risk appetite.</li>
 	<li>Understand the role risk management plays within the strategic planning process (including the roles and responsibilities of shareholders, board, senior management, risk committee, etc. within this process)</li>
</ul>
<h2>Technology Trends and Innovations</h2>
<strong>Problem Statement:</strong> MFI boards, and particularly boards in Africa, face difficult strategic choices regarding how to adopt and utilize new technologies, both to improve existing operations and introduce new business models. The sector has experienced an influx of new financial service providers from telcos to traditional banks moving down market to online lending platforms and retail credit providers.  The rapid emergence of new providers and technologies has accelerated the pace of change making it hard for boards to decide what investment to make at any given time and how best to monitor those investments once a decision is taken.

Given the speed of the changes within markets, there is a natural tendency for institutions—driven by either board or management—to attempt to respond quickly based on “quick and dirty” assessments without fully engaging in the strategic planning to properly understand how a new technology project will support the overall business goals of their organization. To avoid this, boards need a systematic way of assessing both the strategic need and the technological opportunities available in the market to advise their businesses accordingly. Of course having a well-defined technology strategy is only the first step in harnessing the full potential of the new technologies in the market. To ensure successful implementation and adoption of new technology based products and services, boards need to fully appreciate the types of decisions that are likely to emerge once the investment decision is taken and to know how best to monitor the success of these projects over time.
<h3>Program Objectives:</h3>
<ul>
 	<li>Understand key trends and new technologies in the financial sector, with an appreciation of the pros/cons and common challenges associated with each. Focusing on: 1) Innovative core banking solutions, including possibilities for cloud-based platforms.   2) Delivery channel solutions including mobile banking, ATMs, POS, Internet banking and extension services (mini branches, digital field applications)   3) Leveraging technology to collect and manage data (including scoring) and optimizing operating efficiency through new technologies including digital field applications. This will include a focus on how technologies can enable better data collection and management to understand clients more deeply and manage social performance objectives  . 4) Leveraging other distribution networks and partnerships including; agent networks, ATM/POS, national switches, mobile money and others</li>
 	<li>Appreciate the implementation lifecycle of delivery channel solutions and how this differs from traditional IT projects such as Core Banking Systems</li>
 	<li>Understand available tools and identify effective processes for introducing and/or assessing existing technology projects within the business covering the full project lifecycle through to post go live monitoring.</li>
 	<li>Recognize the need for a significant “mindset shift” to assess technology opportunities through a more rigorous business lens, based on analysis of the MFI’s strategic needs as well as how the technology will support the business. As part of this, the participants will need to recognize the attributes of an effective feasibility assessment and business case to guide the investment in new technology projects.</li>
 	<li>Appreciate the types of skills and experience that ideally would be available on a board to input and monitor technology projects technology.</li>
</ul>
<h2>Navigating Competitive and Challenging Environments</h2>
<strong>Problem Statement:</strong> As MFIs and their operating environments transition from small-scale, marginal players to significant actors serving important numbers of clients and filling a key role in the financial system, MFIs face a variety of challenges: sharper regulatory and political scrutiny, intensified competition amongst themselves and from new entrants for clients and staffing, the risk of over-saturated markets or a loosening of credit discipline, and more demanding requirements for MIS and risk management.  How can boards deliberately and strategically stay abreast of the dynamics of the changing operating environment and add value and oversight to management's efforts to preserve and enhance the company's competitive position? What tools and practices will help them navigate these challenges?
<h3>Program Objectives:</h3>
<ul>
 	<li>Identify best practices in board-level strategic process to look forward and anticipate where the market will be rather than where it is or has been.</li>
 	<li>Understand the characteristics of the stages of market cycles and ways to revisit and reconfirm the company's strategic competitive positioning and niche.</li>
 	<li>Recognize the impact of competition on clients and the bases of customer and staff satisfaction and loyalty.</li>
</ul>
&nbsp;

ABF Opening Seminar Spring 2018

<p>The <a href="http://www.ada-microfinance.org/en/events/african-microfinance-week/otherevents-en#accion">Governing in a Digital Age Roundtable</a>, a CFI event hosted at <a href="http://www.ada-microfinance.org/en/events/african-microfinance-week">Africa Microfinance Week</a>, will cover key governance issues among leading CEOs, board members, investors and regulators from African microfinance and financial inclusion industries. Over two days, financial inclusion industry leaders will engage in peer learning and exchange about the role of a board as a vital guiding tool for top-management as new and disruptive channels and models emerge. The roundtable will also provide an opportunity for an “expert exchange” on technology, governance, risk and strategic planning.</p>



<p>The roundtable is by invitation only, but our team is attending Africa Microfinance Week and we look forward to meeting you. Contact <a href="mailto:dpiskadlo@accion.org">Danielle Piskadlo</a> with questions.</p>



Governing in a Digital Age Roundtable

The sixth cohort of the Africa Board Fellowship (ABF) program convenes in Cape Town, South Africa for its closing seminar on April 9-11. The seminar will be an interactive combination of guided discussion and peer-to-peer exchange on governance best practices and risk-management strategies, with an emphasis on fellows sharing knowledge and experience.

World-class experts and leaders in microfinance and financial inclusion will facilitate and engage participants in active dialogues. The aim of the Africa Board Fellowship program is to connect board members and CEOs through peer learning and exchange to strengthen the governance of financial institutions serving low-income clients in sub-Saharan Africa.

&nbsp;

&nbsp;

&nbsp;

&nbsp;

&nbsp;

Africa Board Fellowship Closing Seminar

<img class=" wp-image-25789 alignleft" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/08/30784872334_b499dfc281_m.jpg" alt="30784872334_b499dfc281_m" width="88" height="109" /><em>The following is part of an Africa Board Fellowship </em><a href="/series/abf-spotlight/">blog series</a><em> spotlighting the experiences of participants and reflections from industry experts.</em>

In the previous blog in this series, we reframed external challenges as a “normal” part of doing business for financial service providers (FSPs) targeting the base of the pyramid. And based on insights from Africa Board Fellows, we looked at <a href="http://cfi-blog.org/2018/08/09/navigating-challenges-is-what-boards-are-all-about-part-1-anticipating-challenges/">specific ways board members can anticipate and even shape the challenging aspects of their operating environment</a>. However, while most boards have more potential for external influence than they often exercise, there are always external factors that cannot be controlled. Boards must also continually focus on reducing the FSP’s vulnerability and enhancing its resilience<img class=" wp-image-25794 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/08/31479737602_1ed7a2ba32_k.jpg" alt="31479737602_1ed7a2ba32_k" width="638" height="93" />
<h2>Reducing Vulnerability</h2>
Beyond external awareness and efforts to shape the operating environment, boards can direct their institutions to take internal steps to minimize exposure to external shocks and increase the FSP’s ability to withstand changes in the operating environment. These steps aim to secure adequate financial cushions and human resources to cope with shocks.
<ul>
 	<li><strong>Strategic Planning</strong>: As part of strategic planning<strong>, </strong>the board should review external factors, including client demand, current and future market penetration of its own institution and competitors, and market saturation by area. The strategic plan should include multiple scenarios (e.g., conservative, base case, and optimistic) as well as short, medium and long-term targets. The plan should be reviewed and revised on a regular basis.</li>
 	<li><strong>Capital Adequacy</strong>: Board members bear ultimate responsibility for ensuring that the institution’s capital and liquidity are adequate to surmount whatever disruptions can reasonably be anticipated, and – just as important – ensuring that management takes quick action to cut costs if capital starts eroding. Improvement in the economic environment is often just around the corner, but it can remain around the corner just long enough for the institution to become insolvent and fail. For regulated institutions, regulators set minimum capital adequacy and liquidity ratios, but this does not absolve directors from the responsibility to determine whether additional capital and liquidity would be prudent. Directors can work with management to evaluate how capital and liquidity will be affected in various scenarios.</li>
 	<li><strong>Asset–Liability Management</strong>: Like any financial institution, FSPs are exposed to balance sheet mismatches, such as currency mismatches when borrowing in dollars or euros. While avoiding hard currency loans may not always be feasible, CEOs and board members should scrutinize foreign currency exposure carefully and limit it to levels that the institution can absorb if currency devaluation does occur. To prepare for currency fluctuations, Vision Fund Zambia’s board instituted a policy against foreign currency denominated borrowing, as CEO Nkosilathi Moyo describes in <a href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/07/nkosilathi-_moyo_visionfund_final.pdf">this interview</a>. Passing foreign exchange risk on to clients by denominating loans in foreign currency is usually not an effective risk management technique, as most clients are even less able to absorb such risk than the FSP lender.</li>
 	<li><strong>Staff Training and Incentives</strong>: As part of their fundamental responsibility for the viability of their institution, directors must closely scrutinize how management proposes to train and incentivize staff to ensure that they support strong operational procedures that appropriately retain and encourage staff. Staff knowledge and loyalty can be essential in a crisis situation.</li>
</ul>
<h2>Enhancing Resilience</h2>
[caption id="attachment_25799" align="alignright" width="226"]<img class="alignnone size-full wp-image-25799" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/08/paul-dileo.jpg" alt="Paul DiLeo" width="226" height="250" /> Paul DiLeo[/caption]

Inevitably, with all the best efforts and preparation, some external events cannot be avoided. But this doesn’t mean they cannot be planned for, even if they may take very different forms. Boards can be better prepared to recover from shocks if they take the following steps:
<ul>
 	<li><strong>Board Composition and Training</strong>: Board self-evaluations should be performed on at least an annual basis to ensure the right skills are represented and to identify gaps. Any areas of improvement should be addressed by training, bringing in experts, and field visits to other institutions that have successfully dealt with relevant challenges and opportunities. Proactively taking these steps can help directors be more prepared for the unexpected.</li>
 	<li><strong>Executive Committee of the Board</strong>: The ability to act quickly can be crucial to responding successfully to external shocks. Many boards have directors in far-flung locations, and it may be hard to assemble a quorum. Even when formal decisions are not required, the CEO and senior management will benefit from the counsel and insights of board members. Many boards designate a small executive committee, usually drawn from in-country directors, authorized to take decisions and provide counsel to management between meetings of the full board.\</li>
 	<li><strong>Disaster Planning and Recovery</strong>: Board directors should ensure that contingency plans addressing a variety of common challenges are prepared and kept up to date. These will cover matters ranging from “phone trees” indicating who calls who to confirm staff safety and whereabouts in the event of a natural disaster or security threat, to secure offsite data backup and recovery to succession planning in the event of loss of a key manager. As Resi Janssen of FFSL South Sudan <a href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/07/resi_janssen_fssl.pdf">notes</a>, the first priority in a serious crisis is to ensure that staff are safe.</li>
</ul>
FSPs operate in dynamic environments where challenges and opportunities are constantly changing. Board directors with a good understanding of the institution’s strengths and weaknesses and a grasp on the operating environment play a crucial role in helping shape the environment over the medium term, and ensuring that the FSP and its management are resilient and prepared.

<strong>CFI is currently recruiting fellows for the next cohort of the <a href="https://content.centerforfinancialinclusion.org/about/what-we-do/africa-board-fellowship-program/">Africa Board Fellowship Program</a>. If you or someone you know is a board member or executive at an Africa-based MFI or financial service provider, we recommend considering this opportunity.</strong>

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Navigating Challenges Is What Boards Are All About – Part 2: Vulnerability and Resilience

<em><img class=" wp-image-25789 alignleft" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/08/30784872334_b499dfc281_m.jpg" alt="30784872334_b499dfc281_m" width="88" height="109" />The following is part of a <a href="https://cfi-blog.org/tag/abf-blog-series/">blog series</a> spotlighting the perspectives and experiences of CEOs and board members of financial institutions, as well as industry experts, who have participated in CFI’s <a href="https://www.centerforfinancialinclusion.org/programs-a-projects/abf">Africa Board Fellowship</a> program.</em>

Far from being “extraordinary and rare,” challenging environments are a “normal” part of business for financial service providers (FSPs) targeting low-income populations. We tend to think that external environment challenges are extraordinary events that cannot be predicted or are too varied and diverse to prepare for—and therefore are best confronted as they arise. What do currency devaluations, deteriorating security, political interference or regulatory upheavals have in common? Can we can plan for them all and prepare effective responses in advance? Do responses need to be tailored to each circumstance?

Through the <a href="https://www.centerforfinancialinclusion.org/programs-a-projects/abf">Africa Board Fellows program</a>, we have reviewed a wide sample of the external threats faced by the boards of FSPs in recent years in Africa and globally: economic fluctuations, currency devaluations, violence and instability, abruptly announced interest rate caps and capital requirements, natural disasters, terrorism—it’s a long and heterogeneous list.

<img class=" size-full wp-image-25776 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/08/31589334426_3111c44396_z.jpg" alt="31589334426_3111c44396_z" width="640" height="377" />

Despite this diversity, an engaged FSP – led by an active board – can often do quite a bit to shape and influence the operating environment or ready the institution to survive shocks. Preparing for and responding to crises, threats and opportunities is, in fact, a core responsibility of senior executives and board directors. Conversations with Africa Board Fellows demonstrate that boards <em>can</em> prepare by:
<ul>
 	<li>Anticipating and minimizing the likelihood of adverse external developments</li>
 	<li>Reducing the vulnerability of the institution to such shocks</li>
 	<li>Enhancing the resilience (ability to recover) of the institution to the situations it will inevitably face</li>
</ul>
We’ll tackle the first point on anticipating and minimizing shocks here. We’ll cover the last two points in our next post in this <a href="https://cfi-blog.org/tag/abf-blog-series/">series</a>.
<h3>Anticipating Challenges with an Ear to the Ground</h3>
<img class=" wp-image-25790 alignright" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/08/how-to-anticipate-changes-as-a-board-member.png" alt="how to anticipate changes as a board member" width="196" height="330" />The first step is to anticipate – and hence be prepared to mitigate – challenges. To do this, board directors must keep abreast of new entrants, potential disruptions, and promising opportunities in the marketplace. Directors cannot rely solely on management for this information. Instead, they should develop their own sources to supplement and confirm management’s view, such as by networking with industry observers and analysts–with management’s knowledge, of course. Locally based board members have an advantage in developing and maintaining such networks, which is one reason it is important to recruit qualified local directors. For example, finding and retaining qualified local directors has been a priority for FSSL South Sudan, given the ongoing political disturbances in the country that make it difficult to maintain continuity of leadership.
<p style="text-align: left">Talking frequently with FSP staff and clients is another way board directors can anticipate challenges. Frontline staff are in a position to report on competition, clients and local happenings. And it should go without saying – but always bears repeating – that clients can provide ground-level insight. Clients may reveal such things as their vulnerability to displacement in government raids on the informal sector or the inability to import goods. When ABF fellows from the Ivory Coast conducted client visits, these were some of the specific challenges about which they learned.</p>

<h3>Getting Ahead of Operating Challenges with Active Participation</h3>
While they can never control the external environment, board members can help shape it to some degree through the following:
<ul>
 	<li><strong><em>Create and participate in industry associations; promote and follow codes of conduct</em></strong>. Industry associations establish frameworks for fair practices and client protection and help facilitate self-regulation and compliance with governance and transparency requirements. An active industry association can also work closely with regulators and other government actors to help shape legislation, regulation and perceptions of the industry, which are all key features of the operating environment. Board directors should support and encourage management to devote time to nurturing strong associations – a medium term project – and engage directly with other FSP board directors to make this an industry priority. As one example, Barnabe Francois, CEO of Microcred Ivory Coast, <a href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/07/barnabe_francois_microcred.pdf">has been an active member of banking associations</a>, first in Madagascar and subsequently in Ivory Coast.</li>
 	<li><strong><em>Develop relationships with regulators and government officials. </em></strong>To reinforce the efforts of industry associations, FSP management can also cultivate relationships with government officials to advocate and educate them (and the media) on operating environment challenges. Board directors, particularly well-regarded locally-based directors, can greatly enhance the effectiveness of such engagement. Or, like MicroCred Zimbabwe, the FSP can appoint an experienced bank regulator to the board (perhaps, a retired official or someone who worked in another country) who understands how regulatory bodies work and can connect on a peer-to-peer basis with regulators.</li>
 	<li><strong><em>Build clients’ financial capability</em></strong>. An important aspect of an FSP’s risk management responsibilities is ensuring that clients use financial services responsibly and productively. Misunderstanding how financial services work can lead to multiple borrowing, or mismatched cash flows which often threaten clients’ ability to repay their loans. To ensure good value to clients and the long-term viability of the FSP, board directors should encourage management to include initiatives in strategic plans to help clients build their financial skills and practice good habits.</li>
</ul>
<ol>
 	<li style="list-style-type: none"></li>
</ol>
Such efforts can, over the medium term, reduce the likelihood that an FSP or the entire sector will face certain types of challenges and will help position providers to take advantage of new opportunities.

<em>Stay tuned for the next blog in this series</em><em>, which will highlight reducing an FSP’s vulnerability to external shocks, as well as enhancing resilience.</em>
<h4><strong><i><span style="margin: 0;font-family: 'Calibri', sans-serif"><span style="color: #000000">CFI is currently recruiting fellows for the next cohort of the </span><a href="https://content.centerforfinancialinclusion.org/about/what-we-do/africa-board-fellowship-program/">Africa Board Fellowship Program</a><span style="color: #000000">. If you or someone you know is a board member or executive at an Africa-based MFI or financial service provider, we recommend considering this opportunity.</span></span></i></strong></h4>
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Navigating Challenges Is What Boards Are All About – Part 1: Anticipating Challenges

Though Nigeria’s government has set ambitious goals for financial inclusion, the majority of its people lack a formal bank account. Accion has worked in the country since 2007 to expand access to financial services.

<img class=" wp-image-25789 alignleft" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/08/30784872334_b499dfc281_m.jpg" alt="30784872334_b499dfc281_m" width="88" height="109" /><em>The following is part of a <a href="https://cfi-blog.org/tag/abf-blog-series/">blog series</a> spotlighting the perspectives and experiences of CEOs and board members of financial institutions, as well as industry experts, who have participated in CFI’s <a href="https://www.centerforfinancialinclusion.org/programs-a-projects/abf">Africa Board Fellowship</a> program.</em>

In recent years, some African countries have experienced slower economic growth and less stability in their currencies. This deterioration in macroeconomic conditions has presented challenges for financial service providers (FSPs) seeking to serve the base of the pyramid and improve financial inclusion. Some ways macroeconomic conditions impact FSPs include:
<ul>
 	<li>Higher operational expenses (e.g., imported IT equipment and software; office leases and technical services invoiced in foreign currency)</li>
 	<li>Increase in non-performing loans as small businesses have had fewer growth opportunities</li>
 	<li>Higher cost of funds (both deposits and debt)</li>
 	<li>Reduced access to debt from international and local providers</li>
 	<li>Decrease in revenue or tighter margins</li>
</ul>
We're talking to <a href="https://www.centerforfinancialinclusion.org/programs-a-projects/abf">Africa Board Fellowship</a> (ABF) alumni to share their experiences dealing with deteriorating macroeconomic conditions.

ABF alumnus Deji Fisho, Board Member of Fortis Microfinance Bank in Nigeria, provides insights into the implications for FSPs on the 2016 decision by the Central Bank of Nigeria to allow the exchange rate for the Naira to be market driven.

<em>It affects a microfinance bank’s exposure to dollar loans. When the currency devalues, MFIs have to spend three times more Naira to keep money in dollars. But with the oil market crash, there weren’t even enough dollars coming in for repayments, so people have to go outside the bank to the black market to get dollars. In a currency devaluation situation like this, MFIs won’t have money to lend. The bigger banks borrow from the government and the smaller banks borrow from the bigger banks. So there is no trickle down to MFIs if the larger banks don’t have the cash.</em>

Learn more in <a title="Deji_Fisho_Fortis MF Bank" href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/07/deji_fisho_fortis-mf-bank.pdf">Deji's full interview</a>.

ABF Fellow Nkosilathi Moyo, CEO of VisionFund in Zambia, comments on how currency devaluations impact clients:

<em>Some of our clients are traders, so they buy goods from Democratic Republic of Congo, South Africa and Tanzania. Devaluation meant that our clients had limited foreign currency to meet their business needs, resulting in default.</em>

<em>After the fluctuations, we revised our risk appetite statement to ensure that it is aligned with prevailing market conditions. For instance, the board made a decision that we should not contract any foreign currency denominated loans. Additionally, we reviewed our risk concentration to ensure we do not have too much focus on any one region or industry. For example, we are shifting some of our focus away from traders in the mine areas to smallholder farmers.</em>

Read more in <a title="Nkosilathi _Moyo_VisionFund_Final" href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/07/nkosilathi-_moyo_visionfund_final.pdf">Nkosilathi's full interview</a>.

Regulators can sometimes respond to macroeconomic problems by imposing regulations designed to keep risks out of the financial sector. One response is to impose higher minimum capital requirements or higher reserve requirements. These may sometimes be imposed directly after a collapse of a similar type of financial entity due to a sudden bank run. Such restrictions can be debilitating for financial institutions, especially when they are imposed suddenly. Although meant to protect depositors, this type of regulation can push smaller FSPs out of the market.

In 2017, Mozambique recently faced challenges arising from multiple factors: political tensions and violent clashes, a debt scandal that resulted in the suspension of aid from key donors and endemic corruption. This affected macroeconomic variables, with a significant currency devaluation in 2016 and high inflation (15 percent) in 2017. These tough macroeconomic conditions led regulators to impose a higher minimum capital requirement on financial institutions. ABF Fellow Titos Macie, Socremo Board Chair, discusses the impact of that increase on the institution.

<em>The deteriorating macroeconomic fundamentals, along with the non-performance of two major banks (one liquidated and one placed under the central bank administration), caused the central bank to increase minimum capital requirements. Initially, the central bank had indicated that the new capitalization requirements would be 500 million meticais, an increase from MZM 70 million, so the board made plans to meet that requirement within three years by not paying out shareholder dividends [and using] share premium and retained earnings to capitalize the bank. When the official decree was actually issued by the central bank, the capitalization requirement was much higher: MZM 1.7 billion (US $26 million). Facing this requirement, the board had little room for maneuver. It took a decision to downgrade Socremo from a full commercial banking license to a micro bank license. Socremo can still do almost all financial services, except for forex business.</em>

<a title="Titos_Macie_Socremo" href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/07/titos_macie_socremo.pdf">Titos' full interview</a> includes a discussion of the impact of currency devaluation on its clients. Accion discusses its recent investment in Socremo <a href="http://blogs.accion.org/features/plan-bring-small-businesses-in-mozambique-support/">here</a>.

Titos sums up how many FSPs operating in challenging macroeconomic and regulatory environments feel: <em>We are surviving and looking at a better future.</em>

<em><strong>CFI is currently recruiting fellows for the next cohort of the <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/abf">Africa Board Fellowship program</a>. If you or someone you know is a board member or executive at an Africa-based MFI or financial service provider, we recommend considering this opportunity.</strong></em>

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Dialogue With Africa Board Fellows: Navigating Challenging Macroeconomic Environments

<em><img class=" wp-image-25789 alignleft" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/08/30784872334_b499dfc281_m.jpg" alt="30784872334_b499dfc281_m" width="78" height="97" />The following is part of a <a href="https://cfi-blog.org/tag/abf-blog-series/">blog series</a> spotlighting the perspectives and experiences of CEOs and board members of financial institutions, as well as industry experts, who have participated in CFI’s <a href="https://www.centerforfinancialinclusion.org/programs-a-projects/abf">Africa Board Fellowship</a> program.</em>

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Few countries have escaped socio-political unrest, conflict or periods of crisis. As the consequences of such events can be severe for both financial service providers and their customers, it behooves every board and CEO to consider how they might prepare themselves to respond when the political environment around them deteriorates.

[caption id="attachment_25747" align="alignleft" width="169"]<img class=" size-full wp-image-25747 alignleft" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/07/barnabe_francois-headshot-e1532552860511.png" alt="Barnabe_Francois Headshot" width="169" height="215" /> Barnabe Francois, ABF Fellow. Copyright Accion[/caption]

<a href="https://www.centerforfinancialinclusion.org/programs-a-projects/abf">Africa Board Fellowship</a> (ABF) alumnus Barnabe Francois, CEO of Microcred Ivory Coast, described a crisis his institution faced in early 2017 in which a range of events all struck at the same time:

<em>“In January 2017 former soldiers demanded money from the government and violence erupted. At the same time, there were strikes within the public administration that lingered for three weeks. The timing could not have been worse, since the government had recently kicked out as many as 500 of our customers who were selling on the streets. This affected us tremendously. We had been in the process of addressing issues related to repayment when the political unrest escalated.”</em>

The immediate effect was seen in Microcred’s portfolio at risk (PAR), which jumped from 3.8 percent in December 2016 to 5.1% in January 2017.Barnabe continues,<em> “Since then, we have struggled to get back to our target PAR of 3 percent. As for our clients, some of them are still facing problems. Many lost all their goods because they had to flee the area when the government kicked them off the streets. I should also mention that there were some who were not affected by the unrest, but took advantage of the situation by claiming they were impacted and refusing to pay.”</em>

The board was very concerned when this happened, and increased its attention to PAR targets. “<em>We had a high concentration of clients in one particular area. This prompted me to start an expansion plan and we have opened new branches in other areas in order to have a more diversified portfolio.” </em><a title="Barnabe_Francois_Microcred" href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/07/barnabe_francois_microcred.pdf">Barnabe's full interview</a> goes into greater detail about lessons learned from ABF in navigating these challenges.

[caption id="attachment_25746" align="alignright" width="206"]<img class="alignnone size-full wp-image-25746" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/07/resi_janssen.png" alt="Resi Janssen Headshot" width="206" height="237" /> Resi Janssen, ABF Fellow. Copyright Accion[/caption]

ABF Fellow Resi Janssen, Board Chair of Finance, South Sudan Limited (FSSL) faced a more extreme situation due to political and economic chaos in South Sudan. Violence made it dangerous for many clients and staff, and at the same time South Sudan’s economy was hit with devaluation and inflation, making the currency nearly worthless. One predictable response was flight, as Resi explains:

<em>“In July 2016, some staff in one branch fled to Uganda and did not come back. Due to devaluation and inflation, the salaries of staff in terms of US dollars diminished some 25 times. We doubled the basic salary in January 2017, but this was still far from enough to earn a decent living…</em>

<em>Several clients lost properties. Businesses were looted (some tens, not hundreds). Because of the conflict, a few hundred clients fled to northern Uganda and DRC.”</em>

In her <a title="Resi_Janssen_FSSL" href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/07/resi_janssen_fssl.pdf">full interview</a>, Resi offers the following concrete advice for MFI board members on how to support staff and clients during periods of unrest:
<ul>
 	<li>Make sure staff is safe.</li>
 	<li>Have a contingency plan, and make sure everyone is aware of the content. Staff need to know it.</li>
 	<li>Have as few costs as possible in foreign currency. Conflicts always cause devaluation.</li>
 	<li>Have as few expatriate staff as possible. They evacuate in times of crises and are too expensive.</li>
 	<li>Have offices in relatively safe areas, although “safe” can change quickly.</li>
 	<li>Have savings insurance.</li>
 	<li>Ensure some local board members who are committed, qualified, have authority to make decisions, and are not likely to go abroad.</li>
 	<li>Be in close contact with staff—at least weekly visits or calls with the CEO and monthly board meetings.</li>
</ul>
The services of financial institutions can be especially important for clients during difficult times. A wide range of financial services can support people at the base of the pyramid and small businesses to weather shocks from deteriorating economic conditions and social unrest. This underlines the need for financial institutions and their boards to anticipate and prepare to navigate challenging contexts. With the <a href="https://www.centerforfinancialinclusion.org/programs-a-projects/abf">Africa Board Fellowship</a>, we strive to strengthen the capacity of financial institutions at the executive level so they can do just that.

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Financial Institutions in Times of Political and Social Unrest: Thoughts from Africa Board Fellows

<em><img class=" wp-image-25789 alignleft" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/08/30784872334_b499dfc281_m.jpg" alt="30784872334_b499dfc281_m" width="90" height="112" />The following is part of a <a href="https://cfi-blog.org/tag/abf-blog-series/">blog series</a> spotlighting the perspectives and experiences of CEOs and board members of financial institutions, as well as industry experts, who have participated in CFI’s <a href="https://www.centerforfinancialinclusion.org/programs-a-projects/abf">Africa Board Fellowship</a> program.</em>

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The mention of overheated credit markets sends chills up the spine of anyone who lived through the crises in Bosnia, Andhra Pradesh, Morocco, or Nicaragua, where market saturation played a prominent role. While regulators and investors have key responsibilities in avoiding these crises, boards of financial service providers (FSPs) must also steer their organizations carefully when more companies enter the space to compete for the same customers. And since portfolio at risk at 30 days (PAR30) is a lagging indicator in the earlier stages of a <a href="http://www.cgap.org/publications/regulatory-options-curb-debt-stress">credit market cycle</a>—growth and high liquidity mask debt stress for a time—boards have to be more creative about how to understand what is actually happening.

We spoke with two <a href="https://www.centerforfinancialinclusion.org/programs-a-projects/abf">Africa Board Fellowship</a> alumni from Uganda, ECLOF Board Chairman Vincent Kaheeru and UGAFODE Board Member Olive Kabatalya, to capture their insights on governing in a competitive environment. “There are about 2,000 institutions [in Uganda] that could pass for microfinance institutions,” explained Vincent. “It’s quite a complicated market because there are both big and small players. Even the big banks target the smallest savers and borrowers.”

Based on their experience, Vincent and Olive offered other board members the following guidance:

[caption id="attachment_25725" align="alignright" width="300"]<img class="alignnone size-medium wp-image-25725" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/07/abf-fellow-olive-kabatalya-at-table.jpg?w=300" alt="ABF Fellow Olive Kabatalya sitting at table." width="300" height="214" /> ABF Fellow Olive Kabatalya (left). Copyright Accion.[/caption]
<h2><strong>Anticipate Where the Market Is Going</strong></h2>
“For any strategic response to be meaningful, the conversation between board and management needs to happen early in the credit market cycle,” warns Olive. “Keep studying market trends in any way possible. Pay attention to the media, newspapers, central bank announcements and other sector players. Financial sector studies like <a href="http://www.finmark.org.za/publications/">Finscope</a> are very informative. Look for reports from and talk to microfinance associations.”
<h2><strong>Meet Your Customers</strong></h2>
“Bring the customer closer to you and listen to him or her,” said Vincent. “You can’t serve them generally. It doesn’t work. Client visits were an idea we picked from the <a href="https://www.centerforfinancialinclusion.org/programs-a-projects/abf">Africa Board Fellowship</a>. We [the board] had done them occasionally, but we intensified the number of visits and changed the approach to make the visit more effective. When you visit customers, you understand the context of all that is going on. That helped me and my team.”

Olive added, “We are visiting clients to ensure that we are not just reading performance reports, which do not usually include anything to do with meeting the needs of the client.”
<h2><strong>Get Creative with Target Market and Product Differentiation</strong></h2>
[caption id="attachment_25726" align="alignleft" width="300"]<img class="alignnone size-medium wp-image-25726" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/07/abf-fellow-vincent-kaheeru-and-robert.jpg?w=300" alt="ABF Fellows Vincent Kaheeru and Robert Ongodia" width="300" height="214" /> ABF Fellows Vincent Kaheeru (right) With Robert Ongodia, Accion. Copyright Accion.[/caption]

“We have a situation of multiple borrowing,” explained Vincent. “Many people have three or four loans from different financial service providers. It burdens the clients. But I’m also aware that the target clientele is narrow. There are still many people at the bottom of the ladder who want to borrow. Lenders need to be more creative and develop products to bring more of the unserved ‘into the boat’…

We’re doing studies to be more responsive to the needs of our market. Everyone offers the common products. If we don’t differentiate, we’re the same. We’re looking at products that will appeal to the target market by helping the target market make money…

About half of our portfolio is urban and half is rural. Each carries different risks. In rural areas, we’re looking at agricultural value chains, helping the farmer bridge the gap between harvesting and processing; and [we look at] the market side, so farmers are not stranded with a crop and can fetch a good price. We’re also looking at microinsurance to protect our investment as well as [appeal to] the interest of the client in case of drought.”
<h2><strong>Pay Attention to Your Staff</strong></h2>
“We’ve had a challenge with our highest performing staff members being poached by bigger and better-paying microfinance organizations,” said Olive. “This has caused us to review staff benefits.”
<h2><strong>Ensure Effective Operational Controls</strong></h2>
In competitive environments, FSPs face all the risks of rapid growth, including a deterioration of operational controls, without actually growing. As loan officers become more desperate to achieve targets in a competitive space, shortcuts are taken and credit assessment becomes lax. Boards must ensure effective supervision as well as a robust system of checks and balances. “Although growth is what we really want, even as we thirst for growth, we need to be careful that we do not go down with the growth never to be seen again,” said Vincent.
<h2><strong>Improve Your Own Capacity to Manage Risk</strong></h2>
Olive and Vincent also both emphasized, and have exemplified, the importance of board members continually sharpening their own ability to manage risk. Vincent explained, “Things are changing. What worked yesterday won’t work tomorrow. As a board member, you have to keep reading, keep sharing experiences to stay on the cutting edge.”

For more details, read our complete interviews with <a title="Olive_Kabatalya_UGAFODE" href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/07/olive_kabatalya_ugafode.pdf">Olive</a> and <a title="Vincent_Kaheeru_ECLOF" href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/07/vincent_kaheeru_eclof.pdf">Vincent</a>.

<em><strong>CFI is currently recruiting fellows for the next cohort of the <a href="http://www.centerforfinancialinclusion.org/programs-a-projects/abf">Africa Board Fellowship program</a>. If you or someone you know is a board member or executive at an Africa-based MFI or financial service provider, we recommend considering this opportunity.</strong> </em>

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