Kruiff, DavidHartenstein, Stephan2015-04-132015-04-132014https://hdl.handle.net/10986/21722For many years, microfinance has been the poster child of governments, policymakers, and international organizations with the goal of lifting millions of people out of poverty. The notion that microfinance can pursue and achieve the intertwined goals of development and financial profitability without friction predominated. This dual opportunity, combined with a huge untapped market for financial services at the bottom of the pyramid attracted large amounts of funding from international capital markets, triggering unprecedented levels of growth. Until the global financial crisis, the sustainability of the resulting market growth had not been significantly questioned. As the crisis unfolded during the end of 2007, there seemed to be consensus among microfinance practitioners, analysts, and other industry experts that this crisis will be different. The microfinance industry braced itself for anticipated liquidity crunches, increase in costs of funds, and foreign exchange, as well as a sharp rise in portfolio arrears. This paper will: review recent publications that have drawn conclusions on the effects of the global financial crisis based on empirical data research; draw the conclusion that proper governance and risk management systems are essential and can have avoided many of the problems specific microfinance institutions (MFIs) faced during the financial crisis; and highlight Basel framework sections relevant to MFIs and demonstrate how these can be applied to strengthen MFIs.en-USCC BY-NC-ND 3.0 IGOACCESS TO FINANCEACCOUNTINGACCOUNTING STANDARDSADVISORY SERVICESAFFILIATESAFFORDABILITYAMOUNT OF RISKARREARSASSET CLASSASSET QUALITYAVAILABILITY OF CREDITAVERAGE DEBTBALANCE SHEETBANK FOR INTERNATIONAL SETTLEMENTSBANKING LAWSBANKING SECTORBANKING SUPERVISIONBANKING SYSTEMSBORROWINGBORROWINGSCAPITAL ADEQUACYCAPITAL INFLOWSCAPITAL MARKET DEVELOPMENTSCAPITAL REQUIREMENTCAPITAL REQUIREMENTSCAPITAL STANDARDSCASH FLOWCASH OUTFLOWSCENTRAL BANKCENTRAL BANK FACILITIESCENTRAL BANKSCOLLATERALCOLLATERAL REGISTRIESCONSUMER LOANSCORPORATE GOVERNANCECREDIT BUREAUSCREDIT DECISIONCREDIT DEFAULTSCREDIT DISCIPLINECREDIT EXPANSIONCREDIT GROWTHCREDIT LINESCREDIT POLICIESCREDIT PORTFOLIOSCREDIT QUALITYCREDIT RELATIONSHIPCREDIT RISKCREDIT RISK MANAGEMENTCREDIT RISK MARKETCREDIT RISK · MARKETCREDIT SCORINGCREDIT UNDERWRITINGCRISIS COUNTRIESCURRENT ACCOUNTCURRENT ACCOUNT SURPLUSESDEBTDEBT TRANSACTIONSDEFAULTSDEPOSITDEPOSIT TAKING INSTITUTIONDEPOSITORSDEVELOPING COUNTRIESDEVELOPMENT FINANCEDEVELOPMENT FINANCE INSTITUTIONDEVELOPMENT FINANCE INSTITUTIONSDISBURSEMENTSDISCLOSURE REQUIREMENTSDIVERSIFICATIONEDUCATION LOANSEMERGING MARKETEMERGING MARKET COUNTRIESEMPLOYMENTEQUITY CAPITALEQUITY RETURNEQUITY VALUATIONSEXTERNAL AUDITORSEXTERNAL FUNDINGFINANCIAL CRISESFINANCIAL CRISISFINANCIAL INSTITUTIONFINANCIAL INSTITUTIONSFINANCIAL INSTRUMENTSFINANCIAL INTEGRATIONFINANCIAL INTERMEDIARIESFINANCIAL MARKETSFINANCIAL RISKFINANCIAL RISKSFINANCIAL SERVICESFINANCIAL STRENGTHFINANCIAL SYSTEMFINANCIAL SYSTEMSFOREIGN CURRENCYFOREIGN CURRENCY RISKFOREIGN EXCHANGEFORMAL ECONOMIESFRAUDFRAUD RISKFUNDING SOURCESGLOBAL ECONOMYGLOBAL MARKETGOVERNANCE ISSUESGOVERNANCE STANDARDSGROSS DOMESTIC PRODUCTHIGH INTEREST RATESHOLDINGHOUSINGINDEBTEDNESSINFLATIONINFORMATION SHARINGINSTALLMENTSINTEREST INCOMEINTEREST PAYMENTSINTEREST RATEINTEREST RATE CAPSINTEREST RATE RISKINTEREST RATESINTERNAL AUDITINTERNAL CONTROLSINTERNATIONAL BANKINTERNATIONAL CAPITALINTERNATIONAL CAPITAL MARKETINTERNATIONAL CAPITAL MARKETSINTERNATIONAL FINANCEINTERNATIONAL SETTLEMENTSINTERNATIONAL STANDARDSINVESTINGINVESTMENT VEHICLEINVESTMENT VEHICLESLENDERSLENDING EXPOSURELENDING PORTFOLIOLIABILITYLIQUID ASSETSLIQUIDITYLIQUIDITY CONSTRAINTSLIQUIDITY CRISISLIQUIDITY MANAGEMENTLIQUIDITY POSITIONLIQUIDITY PROBLEMSLIQUIDITY RISKLOANLOAN OFFICERSLOAN PORTFOLIOLOAN PORTFOLIOSLOAN SIZESLOCAL CURRENCYLONG-TERM LOANSMACROECONOMIC CONDITIONSMARKET COMPETITIONMARKET CONDITIONSMARKET ENVIRONMENTMARKET PARTICIPANTSMARKET PRACTICEMARKET PRICESMARKET RISKMARKET RISKSMARKET SHAREMATURITIESMATURITYMATURITY MISMATCHMFIMFISMICROCREDITMICROFINANCEMICROFINANCE INSTITUTIONMICROFINANCE INSTITUTIONSMICROFINANCE LOANMICROFINANCE PRACTITIONERSMICROFINANCE REGULATIONMICROFINANCE SECTORMICROFINANCE SECTORSMINIMUM CAPITAL REQUIREMENTSMORTGAGEMORTGAGE LOANSOPERATING EXPENSESOPERATIONAL RISKOPERATIONAL RISKSOWNERSHIP STRUCTUREPAYMENT OBLIGATIONSPORTFOLIOPORTFOLIO QUALITYPROFITABILITYRECESSIONSREGULATORY FRAMEWORKREMITTANCESREPAYMENTREPAYMENT CAPACITYRESERVESRETAIL BANKINGRETURNRETURN ON ASSETSRETURN ON EQUITYRETURN ON INVESTMENTRETURNSRISK ASSESSMENTSRISK CONTROLRISK EXPOSURESRISK FACTORSRISK MANAGEMENTRISK MANAGEMENT SYSTEMRISK MANAGEMENT SYSTEMSRISK PROFILESECURITIESSETTLEMENTSETTLEMENT RISKSHORT-TERM LENDINGSUBSIDIARYSWAPSYSTEMIC RISKTRADE BALANCESTRADINGTRANSACTIONTURNOVERUSE OF COLLATERALVALUATIONWRITE OFFSWRITEOFFSWorking PaperInternational Finance Corporation10.1596/21722