Development Ratings

Reserves are a buffer for expansion plans and potential financial issues in Malawi. Using more of the funds for branch/country expansion would result in higher numbers of loans and therefore impact.

The Zambian start-up has been much slower than predicted and this has been overcome with the first branch operating successfully since April 2009. The costs expended there to date, however, have not been excessive. Similar difficulties may occur in Namibia.

MicroLoan still relies heavily on the goodwill of volunteers to manage some of its key operations (public relations, IT systems). The new professional and full-time staff still have a lot of work to cover.

Microfinance is susceptible to corruption and abuse by loan officers. After problems in this area, the hiring of an auditor, an assistant and regular monitoring of all procedures and training of staff to introduce new controls has resulted in a better repayment and loan write-off position. MicroLoan’s concentration on training clients, working with local headmen and elders, along with procedures such as no MicroLoan staff handle clients’ cash has made operations robust and minimized risk. Reliable figures are now available within 10 days of month end, which mitigates the risk.

Crop failure and heavy rains as well as prevalent health risks (such as a current HIV infection rate of 14% in Malawi) increase the probability of dropout and default.