Character and Capacity-Based Lending
Most commercial financing institutions use asset-based or project-based lending since their target clients are those that have collateral and are able to craft business plans. However, microfinance clients neither have the assets nor the skills to qualify loans from traditional commercial funding sources. Thus, microfinance uses character and cash flow as the basis for extending loans to them. The course enables participants to assess current client selection processes; articulate the principles of microfinance as guide for client selection; practice the use of cash flow and credit and background investigation; modify loan application forms to capture essential information that could be used to evaluate a client’s character; and identify policy gaps to improve client selection and retention. The course hopes to improve the portfolio quality of microfinance institutions and at the same time provide better and more efficient financial services to their clients.