MQUID assists commercial banks and micro finance banks/institutes in developing or expanding their lending activities to micro small businesses. This occurs either by adding another product line or – ideally – by creating a separate business unit.
The idea to establish a specialized business unit bears in mind that the credit technologies used for best-practice MSME lending are conceptually distinct from techniques employed by “conventional” banks in their retail and corporate lending activities. For the commercial success of such project it is crucial that it is implemented into a “clean” environment, which is prepared to absorb the specific methodologies and tools that make small business lending work.
Main Factors of Success
- Concentration on a limited range of highly standardized credit products to reduce operating costs and streamline lending procedures;
- A lean, decentralized organization that assigns a high degree of autonomy and responsibility to the branch offices throughout the loan cycle, as opposed to classical back office / front office structures;
- On-site compilation of key financial data and other risk-relevant information concerning a client, rather than relying on fragmentary, outdated or inaccurate “official” data;
- Compensation for the lack of “conventional” collateral through rigorous social, religious and environmental loan analysis and strong, dynamic repayment incentives;
- Joint decision making in credit committees, which convene on a daily basis to keep processing times to a minimum;
- A transparent and highly performance-oriented staff remuneration and promotion system.
Role and Services of the Consultant
In a typical project, MQUID helps the client to design and set up the new business unit, and advises or manages the unit during the start-up phase.
A temporary outsourcing of management responsibilities to MQUID is warranted especially if the client does not exhibit (or cannot spare) staff with experience in best-practice MSME lending technologies. Comprehensive training and staff supervision efforts serve to build up and identify management talent with potential to successively assume full responsibility for the business unit.
Upon completion of the long-term consultancy assignment, MQUID remains available as an ad-hoc technical partner to clients, and is prepared to provide follow-up training and IT services as required.