Monitoring Guidelines for Semi-formal Financial Institutions Active in Small Enterprise Finance

This guide is a self-study and reference document on the design of a monitoring system. It is designed to help management and staff identify what information is needed for delivering financial services, what types of indicators and questions may be effective in providing such information on a timely and efficient basis, and how an effective monitoring system can be set up and kept functional within the Semi-formal Financial Institutions (SFIs).

The paper suggests that SFIs need to pay more attention to their financial and operational performance as institutional weaknesses are becoming manifest in their management capacity. Only by operating a well-functioning monitoring system will an institution be able to make a start in reducing these weaknesses. The monitoring system can contribute to an overall improvement of the SFI's technical, administrative, and business know-how so that they can provide well-organized and effective services to small entrepreneurs.

Drawing conclusions from the information produced by the monitoring system requires careful analysis if financial products and services, client groups or delivery techniques are to be changed effectively. Especially, one has to be careful not to interpret financial indicators in isolation. Insightful comments from outsiders and frequent discussions with SFI staff can help most institutions to improve their operations. In this way, a monitoring system will enable the SFI to increase professionalism, provide better services to micro and small entrepreneurs and ultimately contribute to improved living and working conditions of the poor.