The Functional Microfinance Bank

Loans at Risk (LAR)

This is a simple indicator that counts the total number of loans instead of their amounts. Though, with little different from PAR they both focus on repayment of outstanding loans.

This can be measured with

LAR (x days) = Number of loans more than x days late

Outstanding Principal Balance (OPB) of all

PAR (x days) = Loans past due more than x days

3. Interest Rate Risk: In this situation, there is danger that revenue from interest earning assets will decline or that interest expenses will increase thereby, reducing the net income of the microfinance institution. Changes in the spread between income and expenses are usually related to either portfolio management decisions or outcome of profitable or unfavourable transaction of the MFB

2. Liquidity Risk: The risk of a microfinance institution running out of cash when it is needed to cover deposit withdrawals and to meet credit request could be dangerous and spell doom for an MFB if the need is not met as the request comes

1. Credit Risk: This is the risk that loans granted to prospective client might not be paid back. It can be individual credit risk in which loan granted to one person is affected, or portfolio based, where loans that falls under a sector or portfolio is affected.

Practical experience has shown that out of a hundred percent of loan given out to clients, only about ten percent of the client has the intention to pay back their loan as when due

The first thing that come to mind when we talk of target market is all market which include all categories of micro clients such as:

 Traders

 Artisans

 Farmers

 Micro, Small and Medium Enterprises (MSME) owners e.g. caterers, hairdressers, carpenters, barbers, service providers etc.

Definition: Financial inclusion

Also known as inclusive financing is meant to stimulate the delivery of financial services to all sectors of the disadvantaged and low-income segments of an economy at a convenient and affordable cost

Target marketing in micro financing is about attracting customers through reliable channels or traffic to gain adequate information about who will eventually buy what an MFB is selling.

MFBs need to know exactly who need their products and services and exactly how to get the products and services to clients reach. This is achieved by breaking the target market into segments and then concentrating the marketing efforts on one or a few key areas. It is a key to attracting clients to an MFB and making it a success