FFI was formed by American investors and by IPC (a German consulting
firm). Its objective is to capitalize on the potential for integration
of its commercial approach to financial market development at the
small end, the experience of its owners and staff, and its relationships
with development assistance agencies, especially those based in Washington
DC.
The case for development of the small end of financial markets is
that it assists the poor and others of modest means to develop their
own businesses, and that microenterprise and small scale loans and
related financial services can be provided profitably. Profitability
is essential to ensure the sustainable delivery of financial services
to this target group. Sustainability is important for several reasons.
First, most entrepreneurs seek to create sustainable activities.
They want to borrow from time to time in order to improve their productivity
and scale. Second, lenders that are not perceived as sustainable
are generally treated poorly by the target group, making recover
loans difficult. Third, profitable practice, the long-run basis of
sustainability, stimulates competition among lenders. Competition
creates incentives for efficiency and innovation, driving down the
costs of financial services for the poor and others of modest means.
FFI views the opening of formal financial markets to micro and small
businesses as an institution building challenge. Institutions are
the vehicles through which financial services for the target group
are designed, managed and delivered. Institutions also reflect efforts
to ensure enduring relationships, to achieve objectives and to provide
platforms for innovation and other forms of creative, productive
expression.
Essential elements in creating institutions include clear vision
and objectives; a simple, disciplined approach to lending and credit
decisions; motivated and well-trained staff; and superb software.
These set the tone for operating effectiveness, for pricing and cost
control, for structuring lasting relationships with clients, and
for market penetration.
