School of Applied Microfinance | Curriculum

This course is based on a toolkit developed by MicroSave (and the Microfinance Consulting Group) and it has the following objectives:

1.	Assist MFIs to review the policies and procedures that govern their loan portfolios in order to bring them into line with international standards
2.	Assist MFIs to assess the effectiveness of the systems of internal control that are used to mange their chief asset and thus allow MFIs to increase the yield on their portfolios
3.	Assist banks and other investors undertake rapid reviews of MFIs’ portfolios in order to inform their investment decisions, and
4.	Assist regulators perform their supervisory function

Overview of the course

The loan portfolio is the primary income-generating asset for an MFI but is often subject to misstatement. Most MFI failures stem from the deterioration in the quality of the loan portfolio. An assessment of the risks inherent in an MFI’s portfolio therefore assumes tremendous importance and this is the most important objective of a ‘loan portfolio audit’. MFI credit (lending) operations have unique characteristics that portfolio assessors/auditors must first understand and this loan portfolio audit course exposes them to these special characteristics so that they can understand the inherent risks, in an appropriate manner. Specifically, the loan portfolio audit course will attempt to expose the participants to the following (not exhaustive) aspects:

»	How to conduct a loan portfolio audit?
»	What are the key portfolio audit procedures to be performed?
»	What tools to use, when and how?
»	Is there a checklist of what to do?
»	How to audit record keeping?
»	How to review loan policies?
»	How to determine the loan sample?
»	How to document the review?
»	How to learn about the MFI’s system of internal controls over the lending activity?
»	What are the key considerations in reviewing internal controls over the lending function?, &
»	Many other (such) questions related to the loan portfolio audit in the context of microfinance.

Usefulness of the course/toolkit

The audit of loan assets (an MFI’s portfolio), includes an audit of the policies/procedures and systems of internal control. Thus, the course (and specifically, use of the toolkit) should not only provide essential feedback (and tips) with a view to safeguard the MFI’s primary asset - the loans to its clients – but more importantly, it should also enable stakeholders to understand the risks inherent in the MFI’s loan portfolio and systems/procedures used to mitigate this risk.

The Loan Portfolio Audit Toolkit provides MFIs/investors/regulators a great opportunity to identify opportunities to improve the governance and management of MFIs’ loan portfolios and to bring them into line with international norms.

The course is very rich with case studies, group exercises, and best/better practices that will help participants understand implications of decisions/directions of MFIs. The course is designed to be very participatory using high standard adult education techniques.