Cette page est une version archivée le 02 avril 2006 du site/annuaire horizon local de Globenet.
Ce site est maintenant fermé; il n'est plus tenu à jour, les informations peuvent être datées ou erronées,
et le seront de plus en plus au fil du temps. Et les formulaires sont désactivés.

Commercial Banks in Micro-finance :New Actors in the Micro-finance World

Par Mayada M. Baydas ; Douglas H. Graham ; Liza Valenzuela, adapted by Karen King (ADA)

The Challenge of Micro-finance for Commercial Banks

Many commercial banks in developing countries are beginning to examine the micro-finance market. During the last five years, their exploration of this new market has been facilitated by donor-funded loan guarantees, central-bank rediscount lines, and specialised technical assistance. Although the initial resources for loans frequently came from donor-funded credit programs, commercial banks in time began to draw on their own deposit sources for a growing share of their total funds for micro-loans.

At the same time micro-enterprise lending NGOs with heavy case loads have begun to transform themselves into regulated banks or specialised financial institutions offering micro-deposit facilities as well as micro-loans.

The U.S. Agency for International Development (USAID) has been concerned with the question of how to expand services to micro-enterprises on a sustainable basis, and in November of 1996 it sponsored a conference with 17 regulated financial intermediaries from 16 countries. The event was a first attempt to convene bankers involved in micro-finance to share their experiences, learn best practices from one another, and discuss obstacles to further expansion.

Why Bankers have not hitherto offered Micro-finance Services

Until the 1980s, the regulatory repression of formal financial markets in most developing countries – interest rate ceilings, high reserve requirements, and directed credit lines – largely precluded established banks from servicing a higher-cost and riskier micro-enterprise clientele. With the advent of structural adjustment and financial liberalising in the 1980s, private domestic commercial banking expanded rapidly. Although the new regulatory environment was more favourable, these new commercial bankers were unlikely providers of loans to small businesses, small farmers, and micro-entrepreneurs.

Competition is growing, however, as new banks enter the market under banking laws that allow more freedom of entry and a less repressed regulatory environment.

Comparative Advantages of Commercial Banks in Micro-finance

At first glance, banks appears well positioned to offer financial services to ever-increasing numbers of micro-finance clients and to earn a profit. Banks have several advantages over non-bank, micro-lending NGOs:

All of these advantages could give banks a special edge over micro-lending NGOs in providing micro-finance services.

Obstacles for Commercial Banks in Micro-finance

Banks lack, however, some key ingredients – most of all, the financial methodologies to reach a low income population.

Our study of banks in micro-finance identified at least six key related issues banks need to resolve to enter the micro-finance market successfully:

Issue for Commercial Banks in Micro-finance

Types of Banks in Micro-finance

In general, there are four main types of intermediaries:

In an institutional setting, micro-finance will not rank high among the operational divisions within the bank, and the future of these programmes will strongly depend on the support of a few important shareholders of bank officers. Furthermore, even programmes that break even and generate earnings are not necessarily secure. They still have to compete with other divisions with even higher earnings for use of the bank's scarce deposit funds. In contrast to free-standing micro-lending NGOs, micro-enterprise programmes in commercial banks must meet a demanding opportunity cost criterion to continue growing with bank resources. At the same time, some banks, to protect their image, may find it difficult to charge a sufficiently high interest rate on micro-loans to cover their costs.

The Policy Environment and six Key Obstacles Banks face in Micro-finance

The policy Environment

The policy arena is of strategic importance for commercial banks. Non-bank micro-lending NGOs can operate in a repressed financial market environment because they are not subject to the regulatory interest rate ceilings, high reserve requirements, and selective – that is, targeted – credit policies characteristic of these markets. Commercial banks, however, cannot escape these regulations, which, in the end, reduce their profit margins. Markets experiencing substantial financial liberalisation offer a far more promising opportunity for experiments in micro-finance to cover lending and default costs and the opportunity cost of funds.

Although important, a favourable policy environment is not sufficient for a successful commercial bank involvement in micro-finance. At the level of the financial intermediary, six conditions contribute to success in micro-finance. These conditions are discussed below.

Commitment and Bank Culture

Commitment at the highest levels of the bank is necessary to make a micro-finance program work successfully. Without this support, micro-finance programs will not receive the human and financial resources they require to consolidate and expand.

Most of the large banks are funding their micro-enterprise programs out of their own deposit resources with relatively minor reliance on donor or government funds. Most of the large banks are risking millions of dollars of their own deposit or equity base to fund these programmes.

As already pointed out, small and specialised banks appear to have stronger institutional commitment to micro-finance. These banks generally have few shareholders and are able to formulate narrower institutional missions. All of the small and specialised banks have small ownership structures, and most have larger percentages (in some cases all) of their portfolio in micro-finance. Thus, their institutional culture is geared toward servicing a lower-income clientele with specialised products.

Administrative Structure

For the large, multi-service banks, the administrative structure of the micro-finance unit is particularly difficult to design. Among the large banks in our study, we found four administrative approaches:

Independent Structures

Fully independent micro-enterprise retail centres, affiliated to the bank but with their own lending policies, staff, and information systems, which report to the larger bank.

Lending through NGOs that, in turn, on-lend to micro-enterprise clients.

Integrated Structures

Semi-independent micro-enterprise units lending directly and/or with specialised windows in each bank branch, staffed with a micro-finance credit officer. Administrative and financial functions are integrated into the larger bank.

Fully integrated operations, wherein the small-business credit officers also handle micro-enterprise clients. All administrative, personnel, and financial systems are integrated.

It appears that the more specialised and independent the micro-finance unit, the easier is it to institute appropriate micro-finance lending methodologies, policies, and procedures and to avoid interference from the larger bank culture.

Financial Products and Methodologies


Over the years, NGOs in micro-finance have developed innovative lending methodologies to reach poor clients with micro-loans. Some of the principal characteristics of micro-lending are:

Although all the banks have instituted some micro-finance techniques and innovations, only a few have carefully thought through all of the elements of their financial product. After the conference, many bankers acknowledged a need to adjust their loan prices and their operating procedures.


The new micro-finance bankers knew relatively little about dposit mobilisation methodologies that reach the low income and/or micro-enterprise client. Perhaps best known is the Bank Rakyat Indonesia Unit Desa savings program, which has the following characteristics:

Features attractive to the micro-client:

Secure deposits.

Real, positive interest rates on deposits.

Operational features of the program:

Human Resources

Until recently, micro-finance methodologies have been labour-intensive, and all the bankers interviewed evinced special concern for recruitment, training, and motivation of staff.

Staff Recruitment and Training

Most banks hired micro-finance staff from outside the bank and preferred young university graduates with little, if any, banking experience. The lack of a banking background apparently made them more receptive to the special mission and practices of the micro-finance programme.

Fourteen of the seventeen banks (both large and small) reported in-house, on-the-job training for new staff. This specialised training is costly, but probably a necessity. All banks require their staff to be familiar with micro-finance methodologies and operating systems and procedures, and they hold meetings clearly articulating the institutional mission in micro-finance.

Staff Remuneration and Incentives

Studies of successful micro-finance NGOs reveal that credit officers' salaries tend to be lower than those found in conventional commercial banking. This finding stems from the fact that these programs, by nature, are highly labour intensive and hence costly.

For large banks with integrated micro-finance programs, however, salary levels can present some difficulties. In one case, salary scales were different and a performance-based bonus remuneration scheme existed for the micro-finance staff. This disparity created some tension with non-micro-finance bank staff who earned conventional, fixed salaries. Most others use the same salary structure of the rest of the bank. In at least three cases, no bonus system existed, perhaps because the salaries were considered adequate already. Banks that have independent micro-finance units are able to have their own lower salary scale and introduce bonus schemes without drawing much attention from the rest of the bank staff.


There are several strategies to reduce costs. First, many banks had high salary structures that could be reduced by recruiting staff who do not necessarily have university degrees. A caveat is in order, however, because the salary savings gained through hiring less-educated staff could be more than offset by lower productivity. Other banks could experiment with alternatives to lengthy individual business analysis techniques. Most could improve staff productivity levels through improved operating procedures and incentive systems.

Banks could explore new methodologies to expand lending. For example, the smart card option of Financiera Familiar appeared to be an excellent cost-cutter for processing repeat loans. It was also well received by clients, who enjoyed carrying their plastic status symbol

Independent profit or cost centres may be a cost-effective strategy for many of the large, multi-service banks. Although initially costly, the separation of programs helps isolate the costs of the micro-finance program and identify appropriate cost-saving measures.

Although micro-finance bankers complain of high costs, it is unclear that their programs are in fact costlier than those of financial NGOs or specialised institutions. Costs for micro-finance are simply higher than those for conventional banking. What is also unclear, however, is whether the integrated structures are fully aware of the costs of the micro-finance programme. Until there is greater separation of costs in these programs, and until banks with micro-finance programs feel freer to share income and expense data, the question of costs will remain open.

Regulation and Supervision

All of the participants at the conference were regulated by banking authorities in their respective countries. While none of the bankers questioned regulation (it is a given), most felt there were important issues that required further attention. Three worries predominated: high level reserve requirements, burdensome reporting requirements, and inappropriate criteria for loan portfolio classification and provisioning.

Legal reserve requirements. In many developing countries, legal reserves on deposits are extremely high, discouraging deposit mobilisation. Banks are less likely to utilise their own, scarcer funds for micro-enterprise programs in this environment.

Reporting requirements. Bank regulatory and supervisory authorities generally require frequent and detailed reports from commercial banks. These reporting requirements were originally designed for institutions with fewer, larger transactions.

Conclusions and Recommendations


The experience of private commercial banks in micro-finance is still relatively limited. Nonetheless, a few patterns are emerging, and a number of challenges continue to require attention.

Most commercial banks largely use their own deposit base for micro-loans. Donor funds and government rediscount lines still represent cheaper sources of funds for a number of organisations, but some conditions and limitations restrict use of these resources. Although all organisations started by cross-subsidising micro-finance units and activities for various periods of time, good repayment rates and high effective interest rates that far exceed the cost of funds allow most organisations to at least break even in the use of their own funs for micro-lending.

Commitment to micro-finance among commercial banks appears to be more likely in small, specialised institutions with few shareholders, or in large institutions that have created an independent unit or subsidiary dedicated exclusively to micro-finance. In both, financial products and methodologies can be adapted to the micro-enterprise or low-income client. Based on the evidence, two other modalities, adding micro-finance to the portfolios of loan officers serving small and medium-sized enterprises, and maintaining a micro-enterprise unit within an overall bank structure, did not appear to work as well.

Micro-finance within commercial banks is largely attributed to the efforts of a single person or to a small group of people to promote these activities. Some of these individuals have been close to and aware of the NGO operations in micro-finance. With few exceptions – for example, Bank Dagang Bali and Financiera Familiar – micro-finance in commercial banks has seldom been based strictly on profit-seeking motives.

Prudential regulation, with two to three exceptions, does not seem to discourage micro-finance activities in most of these banks. No additional requirements, other than what is typically reported by commercial banks to the supervisory authorities, are requested of commercial banks because of their micro-finance activities. The larger commercial banks are able to engage in sufficient self-provisioning to manage these activities properly. Most banks have the flexibility to price their products to break even and cover their costs as well as to make profits. Reporting, however, has been perceived as burdensome in two cases among the smaller, more specialised banks

Commercial banks offer micro-loans that are different from their typical collateralised commercial and consumer loans. These micro-loans, although they share similarities with NGO micro-loan products, such as frequent repayments and quick and inexpensive disbursements, are slightly larger in size and are granted for longer maturities than are typical NGO loans. Moreover, micro-loans provided by commercial banks are granted with different terms and conditions than traditional bank loans. These differences have prompted some commercial banks to offer micro-loans in separate locations from their traditional banking services, highlighting the differences between products. Higher interest rate charges and less rigorous collateral requirements characterise micro-lending by most banks.

With some exceptions commercial banks provide micro-loans on an individual basis rather than through group lending. This individual lending trend contrasts with the group-lending methodology that many NGOs have adopted.

Bank-NGO linkages were not common among the sample, a finding that is not surprising given that banks face information problems in evaluating the creditworthiness of NGOs and that some important differences in operational practices exist between standard commercial bank and NGO micro-loans.

Commercial banks benefited, in a number of cases, from donor-supported technical assistance that promoted the identification of appropriate lending methodologies in different settings.

Recruitment of micro-loan staff largely occurs from outside the bank. Furthermore, recruitment and training are frequently undertaken where bank branches offer micro-finance services, allowing credit officers close screening and monitoring of borrowers in their own environments. Exceptions to this practice are found in some African settings, where banks see a need to reduce the negative impact of strong kinship pressures on lending practices. Adequate remuneration of loan officers for their successful efforts, using performance-based bonuses dependent on the number and volume of loans and loan recovery record, was also practised in the majority of banks issuing individual loans.

In closing, it is clear that donor resources and the technical assistance networks accessed through the resources can play an important catalytic role in launching these programs and breaking down fears or resistance in bank circles to these initiatives. It is also clear that this role can be fairly short-lived, as the bank's own deposit resources are brought into play, and newly recruited personnel and information management software give banks the tools to carry on the promotion of these micro-lending programs as a commercial platform. Although scale and scope economies are limited in the beginning, a period of self-sufficiency is generally reached after three to four years of experience.

Recommendations for the donor Community

Policy and Legal Environment

Donors should argue for the elimination of all repressive financial regulations, such as interest rate ceilings and unusually burdensome reserve requirements or detailed directed credit schemes. Micro-finance can and should be able to emerge and compete in open niche markets as long as formal lenders in financial markets are free to charge interest rates that cover their operating costs, risks, and the opportunity cost of capital.

Donors should encourage policy reform creating a prudential regulatory framework that recognises the idiosyncratic feature of institutions engaged in providing micro-finance services.

Donors should urge more rigorous contract enforcement institutions in the countries in which micro-finance initiatives are operating. Whereas a number of micro-finance institutions emphasise group-loan products, many promote individual loans, especially the commercial bank community, and a few attempt to deal in both products. An effective contract enforcement environment is vital to successfully issue and collect individual loans – in particular, legal and juridical infrastructure. Registry of liens is important as well as legal actions on post-dated checks cashed with no back-up funds. Given the modestly valued collateral typically used to secure individual micro-loans, excessive legal fees for court proceedings are inappropriate. Small claims courts in common law tradition could expedite contract enforcement proceedings in a cost-effective manner. Ex-ante collateral methodologies must have a proper ex-post contract enforcement environment to operate effectively.

Commitment and Bank Culture

Access to outside funds at interest rates below market levels has been the most popular mechanism employed by donors in the past to encourage already functioning banks to experiment with micro-finance programs. Normally, these funds have been provided in conjunction with technical assistance of various degrees of intensity (from full-time resident advisors to training courses to observational trips). Although cheap funds have helped encourage banks to enter the market, it is obvious that they alone are not enough tp calm the fears of risk-averse bankers. Otherwise, there would be many more such programs. In most cases, commitment to micro-finance among commercial bankers is more often explained by the vision of a strong leader within the bank. In other cases, commitment derives from an a priori understanding of the idiosyncracies of the target market, as in the case of the NGO transformation and the consumer and housing finance companies.

Donors are best advised to have a tool box of various offerings, such as pilot loan funds, funds for start-up expenses, technical assistance, information seminars on the micro-finance market, and trips to successful programs – a mix of which could be provided, depending on the nature of the institution's commitment and needs.

Assuming interest extends beyond one or two banks in a particular country, an interesting alternative approach would be to offer funds to the highest bank bidder in an auction. Auctions could be held monthly, beginning from an initial floor price that would fluctuate in relation to the trends in bidding transactions. This approach would be more transparent and would introduce an element of market competition into the process of allocating resources for the market niches of micro-enterprise lending, taking such lending out of the administrative control of a government of donor bureaucracy. The basic floor rate could initially reflect the inter-bank rate in the country in question with a portion of the total amount available put up for auction each month. In short, this approach is more consistent with the spirit of a market rather than an administrative allocation of resources directed to market niche lending.

Organisational Structure

The donor community is increasingly interested in discovering optimal tools for intervention to promote the expansion of financial services to the poor and nearly poor. Recently donors have been exploring the avenue of APEX lending strategies whereby a second-level wholesale organisation (the APEX) channels donor resources downstream through a network of independent retail institutions to service micro-enterprise borrowers. This strategy includes the possibility of working through commercial banks as well as retail-level financial NGOs. Currently there are no rigorous studies establishing any proof that APEX strategy are the most cost effective strategy to reach low-income clienteles with financial services. Arguments in favour of these strategies emphasise the cost economies of channeling donor resources through wholesale units rather than attempting to reach downstream NGOs or banks directly. Allocation decisions to specific retail institutions would also be delegated to these APEX institutions. This strategy raises many questions that, although they merit serious study, go beyond the scope of this paper. Nevertheless, the authors feel that whenever APEX strategies are used to disburse funds to downstream banks or financial NGOs, donor should make sure the APEX organisation does not attempt to alter the organisational or operational norms of the retail institutions. The APEX should not introduce distinct terms criteria beyond the market niche itself. These interventions unnecessarily increase the transaction costs for downstream retail banks or micro-lending NGOs. The retail institutions should be free to set their own creditworthiness criteria and conduct their own evaluation of risk for their clients.

To the extent they may be concerned about the rigor of the credit methodology currently employed by retail institutions or programs, donors should consider technical assistance to improve these lending practices, not selective credit criteria introduced from an APEX. Moreover, this technical assistance should be provided through an independent third-party organisation, not the APEX. There is an inherent conflict of interest in having technical assistance come from the same institution supplying the funds for on-lending. Finally, the APEX should carefully document the repayment record of downstream institutions employing its funds. In this way the APEX could generate positive externalities for the donor community, acting as a credit rating agency for its downstream institutional borrowers.

Financial Methodologies, Human Capital Formation, and Productivity Enhancement

Methodology, human resources, and productivity can be logically joined from the point of view of the donor community. Human capital formation and the knowledge of innovative credit methodologies that generate improved productivity in the supply of the micro-finance services have properties of a public good. The training and knowledge acquired by personnel in micro-finance institutions is disseminated widely as these trained employees move to other institutions that did not invest in the training and knowledge generation nevertheless benefit from the spillover benefits from other institutions that did. In light of these positive economic externalities, subsidies may be legitimate.

Donors can contribute substantially to the growth of micro-enterprise lending programs through continued support for the widespread transfer of financial methodology. Support could take to form of a clearinghouse for documentation of best-practice organisations and sponsorship of visits and internships in best-practice programs for candidates from newly established programs. Continued support is justified for proven NGOs or specialised consulting firms skilled in disseminating best-practice financial methodologies to commercial banks and micro-lending NGOs. These organisations can contribute substantially to human capital formation and the potential for cost conscious productivity growth in new start-up programs. The costs of the technical assistance should be shared by the banks or micro-lending NGOs benefiting from this training and the donor community supporting these efforts. However, the share of the costs borne by the recipient bank or program should rise over time to replace the donor share as user charges emerge. User charges should serve as a market-tested indicator of the success of incorporating best-practice techniques.

Regulation and Supervision

Micro-enterprise units or programs should be expected to report regularly on the number, volume, and loan recovery status of their outstanding portfolios. Therefore, reasonably sophisticated information systems and associated software are required to track and report on these portfolios once they move beyond a rudimentary experimental stage. The major regulatory issue centres on the degree of additional reserves and provisioning that would be appropriate for institutions handling micro-enterprise loans.

The regulatory issues manifest themselves differently in different institutional frameworks. Large private commercial banks with an established regulatory track record and a long history of operating from an example deposit base are subject to much less risk than smaller, more specialised financial institutions, especially former micro-lending NGOs just launching their first deposit mobilisation efforts. Larger banks typically make their own provisions for their micro-enterprise units. Because they are accountable to private owners with a strong interest in solvency and profits, bank management will be watching the bottom line closely on their micro-lending programs given the opportunity cost of the bank's capital and deposits devoted to these programs. It would not appear necessary for regulatory authorities to introduce additional provisioning or detailed reporting requirements for the programs in these banks beyond the standard reports on the number, volume, and provisioning the banks themselves undertake for these activities.

Former NGOs that have been transformed into banks and smaller, specialised banks, in contrast, represent greater prudential risk. They have invariably been credit-only organisations and therefore are undertaking deposit taking for the first time when they purchase a bank franchise. Smaller and more specialised banks also represent greater risk, in this case, through the lack of diversified portfolios; these are dominated by small and micro-enterprise loans. Given the common risks of income shocks faced by their clientele, their interest-earning revenue flows can experience grater volatility than those of larger banks. To cover the risks inherent to these two types of institutions, a higher capital adequacy standard should be considered than that used for the larger banks with micro-enterprise programs.

The role of the donor community in the regulatory realm is necessarily limited but still important. The essential role here should be to encourage and support dialogue between banks administering micro-finance facilities and regulators. Periodic seminars and workshops could be continued along the lines of a recent dialogue among former financial service NGOs, relevant donor representatives, and regulatory authorities in Bolivia. This exercise produced useful guidelines for NGOs considering becoming banks. A comparable effort should be considered in selected African countries, where both the NGO financial services community and regulatory authorities need to explore common issues and problems in a more fruitful fashion. The element of distrust and the lack of knowledge and experience in both constituencies cry out for assistance to help shape the agenda for a more sensitive and serviceable interaction between these two groups. The donor community could play an important role in bridging the gap between them.

In conclusion, two institutional challenges remain in the continuing evolution of these programs in micro-finance. The first is the search for the most cost-effective organisational form for large banking institutions to incorporate micro-finance in an organisation inherently ill-suited to adapt to the cultural world of the micro-finance clientele. The second is the most appropriate governance structure for former financial service NGOs evolving into banks. Within commercial banks in the developing world, integrated, separate, or hybrid forms of organisation are emerging through trial and error. Rapidly maturing micro-lending NGOs are experimenting with several forms of donor-sponsored capital share ownership and governance structures are designed to maintain a commitment to the target group of micro-enterprise clients. For the institutions in this study, these governance structures are still in an embryonic stage and have not stood the test of time. The ways in which these two institutional challenges are met will shape the future of micro-finance in the commercial banking world.

Commercial Banks in Microfinance: New Actors in the Microfinance World

(1)USAID Microenterprise Development Office, August 1997 Contract number PCE-0406-C-006004-00

ADA - ADA Dialogue, numéro 14, août 1998

Pour plus d'informations, contacter: ADA -Appui au Développement Autonome-
15, Bd Grande-Duchesse Charlotte
L-1331 Luxembourg
Tél: (+352) 45 68 68; Fax: (+352) 45 68 60

| Sommaire |

Horizon Local 1997