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The exit problem in credit projects
01.12.1992
The exit problem occurs when individual borrowers fail to repay their loans to credit projects, and when projects themselves are consequently left with a declining pool of funds to lend. Frequently donors allow this situation to continue and bad debts accumulate until they are obliged to cease lending altogether, when a sudden 'hard exit' from the programme occurs. This article describes a proposed design for a wholesale lender, funded by international donors and lending to local credit projects, which would allow client projects either to increase their borrowing incrementally or to withdraw gradually according to the success of their lending record. By following certain clear rules it is hoped that difficulties could be anticipated and dealt with early on and the hardship of a sudden ejection from the credit programme avoided.This article raises some interesting points in the form of a proposal. The editors decided to publish it, in spite of the fact that the system has not yet been tried out anywhere, because it deserves discussion among a wide readership. We would therefore particularly welcome any comments you have upon the system described. -
Networks of MSE banks for financial sector development – a case-study in private–public partnership
01.03.2005
This article follows on from one in 2001, which dealt with the emergence of a network of microenterprise banks. The German consulting firm IPC has been involved with setting up microenterprise banks 'from scratch', first in Latin America in the early 1990s, and then in south-east Europe, and most recently in Africa. This article describes how IPC formed the investment company, IMI, owned by private and public shareholders, and has made investments in 18 microenterprise banks in the last six years. It argues that having the same shareholders within IMI makes it easier to apply the same business model consistently across all the banks and to transfer knowledge and resources between the banks.