MFI Financing Strategy: Guidelines and Template

This microREPORT tries to impress upon readers that, just like asset management, MFIs must also commit to best practice funding management and sourcing if they are to access the private capital required to meet their growth and sustainability goals. Taking a strategic approach to funding is stressed, as is executing and managing funding plans with discipline and a vision fixed on an ideal capital structure. Just as with any other business planning activity, a strategic approach must be based on strong assumptions of future performance and operating environment. As a result, setting funding goals is critical and smaller MFIs must develop strong business planning capacity. Meeting funding goals also requires management structures, procedures and policies matching the complexity and volume of liabilities, without which an MFI will neither be able to properly manage risk exposures nor inspire the confidence of investors. Similarly, a highly structured approach to fund sourcing through an Investor Relations Program is the most efficient and effective way to ensure source capital. No matter how modest an MFI's capital needs are at present, a structured IRP will yield better results and lay the foundation for efficient funding in the future. As such, it is a key part of any funding strategy. Those MFIs who plan and execute funding search and management in a disciplined and structured manner will improve their ability to access private capital, which is clearly becoming a key element in the struggle to serve billions of poor around the world with appropriate financial services.