Designing for Financial Viability of Microenterprise Programs
Microenterprise credit programmes endeavour to balance two potentially conflicting objectives: to provide a broad range of services at low cost to poor people and to generate sufficient revenue to cover programme costs.
This paper presents a model for financial viability of microenterprise assistance programmes. Aims to improve understanding that each decision made in designing a programme affects the quality of service, the effectiveness of the programme and its self-sufficiency.
It presents income as based on six variables:
- Number of loans per month per field worker;
- Effective loan term;
- Average loan size;
- Number of field workers;
- Annual interest rate;
- and commission rate.
Six variables make up calculation of programme expenses:
- Personnel costs;
- Administrative costs;
- Cost of capital;
- Bad debt reserve;
- Devaluation through inflation.
Ratios of information from both the income and expense tables show the programme's level of solvency. Operational self- sensitivity analysis can be undertaken to determine how important each variable is to the final result.
To further illustrate use of the model, example tables are shown drawing on sample data from programmes in Santa Cruz, Bolivia.
The model is then applied to study and compare four different microenterprise credit programmes.
Blank tables are included in an appendix.
