This Finance study guide was written by Joanna Ledgerwood and published by Calmeadow in 1996. The RFLC is grateful for the authors' permission to reproduce it in downloadable form here. The material may be copied or adapted to meet local needs without permission from CALMEADOW, provided that the parts copied are distributed free or at cost – not for profit. Please credit Joanna Ledgerwood. 1996. Financial Management Training for Micro-Finance Organizations: Finance. Toronto, Canada: CALMEADOW for those sections copied.
The guide, together with its companion volume on Accounting, was developed to help people working in the micro-finance field to obtain basic accounting and financial management skills. It is intended for field and Head Office staff of micro-finance organizations; micro-finance consultants; and members of the donor community who would like to understand how micro-finance organizations report and monitor their activities. The guide comprises a set of seven lessons, each containing questions and exercises for which answers can be found in the accompanying Solutions to Exercises document. Unless you are already familiar with accounting theory, it is suggested that you complete the Accounting guide prior to completing this one.
As the field of micro-finance matures, more and more micro-finance organizations are recognizing that they cannot rely indefinitely on donor funding and, therefore, that they will become sustainable in the long-term only when they become financially self-sufficient. As they strive for financial viability, micro-finance organizations are realizing that their products and services must be even more responsive to the needs of their clients, the micro-entrepreneurs, and that they must constantly innovate to improve not only their products but also their operations and management.
This Finance study guide explains the key financial management tools which can be used to analyze a micro-finance organization’s financial health and improve understanding of its clients’ activities. These tools will enable an MFI to design its loan products and delivery mechanisms effectively, and to analyze the results of its operations. They will also aid the organization in its decision making regarding the sources and uses of funds and future planning. Throughout this study guide, emphasis is placed on the important inter-relationship between serving clients well and achieving institutional self-sufficiency. The main focus is on credit services and not savings, because in many countries current legislation does not permit small MFIs to offer voluntary savings products.
Currencies used in the examples and exercises include: Bolivia Boliviano (Bs); Philippines Peso (P); Vietnam Dong (VD); Bangladesh Taka (Tk); American or Canadian Dollar ($); South Africa Rand (Rd); Guatemala Quetzal (Q); Kenya Shilling (Ksh); Dominican Republic Peso (RD$).