Grameen Foundation

BwB seeks a team of 3-4 volunteers to conduct a risk management assessment within two microfinance institutions (MFIs) in Peru and develop recommendations for establishing a risk management unit within each institution. Volunteers should have expertise in one or more of the following areas: corporate risk management, legal/regulatory framework of Peru, and financial reporting and accounting practices. At least one volunteer must be fluent in Spanish. It is preferred that volunteers be familiar with the microfinance sector. 1-2 weeks travel to Peru will be necessary. BACKGROUND The Consortium ‘Promoción de la Mujer y la Comunidad’ (PROMUC) is a Peruvian network of 14 microfinance institutions (MFIs) with presence in 80% of the country. Promuc’s objective is to provide credit access to people with no means of support, mainly enterprising women who do not have formal access to credit. The network of MFIs collectively provides financial and non-financial resources (training and after-sales services) to about 140,000 clients (or approximately 700,000 household members). Bankers without Borders is collaborating with PROMUC to support the volunteer needs of 10 of its MFI member institutions with a specific focus on risk management. EDPYME ALTERNATIVA is a financial institution designed to promote the consolidation and sustainable development of small and micro enterprises by providing credit to micro-entrepreneurs in need and introduce them in the financial market. Alternativa operates since 1993 and currently has the support of the Inter-American Development Bank and the Chamber of Commerce of Lambayeque. EDAPROSPO is a Development Promotion Center, founded on 1978, participating on expanding the capacity of people to improve the quality of life and forming a reasonable and caring society. It started its activities geared to labor union activity and then focus on the entrepreneurs and their economic, health and education needs, forming the first cooperative credit unions, as well as providing microcredit and financial assistance. MENTORS PERU started its activities in 2003 under the name Asociación Civil Surgir, providing microcredit to emerging entrepreneurs who want to improve their quality of life. Customers have been organized into community banks. In 2009 Surgir is renamed to Mentors Peru, focusing the development of customers, especially women, offering business education in addition to microcredit services. Rural Network Association SONDONDO began its activities in 2004, offering credit to micro entrepreneurs engaged in various activities such as commerce, agriculture, transport, etc. The credits are offered with the methodology of community banks, mainly focused on women for inclusion in civic participation and as a generator of income for their households. Alternativa, Edaprospo, Mentors Peru and Red Sondondo are institutions that have fewer than 15000 clients, and their portfolio is smaller than $ 3 million. CHALLENGE Microfinance institutions face many risks that threaten their financial viability and long-term sustainability. Some of the most serious risks come from the external environment in which the MFI operates. Risks that cannot necessarily be controlled but managed through mechanisms that help minimize the potential for negative impact. In order to face these risks, Promuc’s members MFIs have designed and adopted ad-hoc processes and procedures to offset the risks associated with any financial institution: operational, legal, market and credit risk. As these institutions grow their loan portfolio and the number of clients they serve, their risks consequently increase and the need for them to establish a risk management unit becomes more important. PROJECT DESCRIPTION AND OBJECTIVES Risk management essentially involves making educated decisions about how much risk to accept, how to mitigate the risk that cannot be tolerated, and how to manage the real risks that are part of the business. This project aims to conduct an in-depth risk assessment at two MFIs in Peru. The deliverables of the assignment should provide the MFI with the means to identify, monitor and manage risk across the activities of the organization in a manner consistent with best practice in banking, but appropriate to the level of business scope and complexity, and management attitudes towards risk management. As the MFI continues to develop in asset size, product range and complexity and exposure to other financial markets (e.g. money and capital markets), the proposed risk management framework should be able to respond to and support the shift in the exposure profile. The team of volunteers will: -Conduct activities for identifying understanding the intrinsic characteristics of the MFI subject to this assessment. -Incorporate the current situation vis-à-vis risk management through onsite discussions with MFI leadership and key staff to gain an initial understanding of how risk management needs to be developed at the institution; -Identify gaps in the institution’s current risk management program and point immediate and high risk areas for prioritization; -Propose required controls and risk management techniques and procedures and performance measurement requirements; -Develop suitable performance measurement procedures to ensure that risk measurement is supported by appropriate information on the effectiveness of risk management procedures; -Identify reporting and exposure measurement requirements; -Identify organizational requirements (responsibilities and authorities) and risk systems architecture; -Include assessment of skill gaps for risk management staff; and -Assist management in developing key risk management policies, controls and procedures to provide a set of directives and guidelines to regulate the activities of the MFI’s operations. This initial assessment will lay the groundwork for follow-on volunteer projects with the MFI including the development of appropriate training programs for the head of risk management and an operations risk management program including relevant policies, procedures, and training for all staff. VOLUNTEER DELIVERABLES AND TIMELINE -Design framework for analyzing the MFIs’ risks; -Using the framework, conduct a gap analysis within the MFIs; -Daft risk assessment report for each MFI including recommendations for follow-on volunteer projects; -Present findings to senior management in order to gain buy-in for follow-on activities. -Presentation/training to senior management. The team’s final report should serve as an easy reference for employees to gain a quick understanding of management’s requirements, how their own activities relate to the entire operation, and what staff responsibilities are for risk management. VOLUNTEER REQUIREMENTS PROMUC seeks a team of volunteers with: -Expertise in corporate risk management, regulatory framework of Peru, financial operations/accounting practices; -Fluency in Spanish; -Willingness to travel to Peru; -Ability to teach, train and transmit knowledge; -Willingness to hold regular meetings with different stakeholders and levels of beneficiary institutions and PROMUC during the project; -Knowledge of the microfinance industry is a plus. -Volunteers are responsible for covering their travel costs. BwB and PROMUC will assist the volunteers in identifying reasonable accommodations and ground transportation. PROJECT DURATION AND LOCATION The project will involve 2 weeks travel to Lima and other cities within Peru where MFIs are present. The overall project duration is estimated to last 8 weeks: -2 weeks of preparation and contextualization with pre-readings; -2 weeks in the field conducting risk assessment (the number of weeks will vary according to the number of volunteer engaged); -2-3 weeks for post trip analysis and virtual presentations of the results and deliverables to senior management; and -1 week wrap-up. Bankers without Borders® (BwB), through its Latin America office located in Medellin, Colombia, will be responsible for the recruitment and selection of volunteer consultants as well as the terms of their participation during this project. PROMUC will serve as the main contact and intermediary for the MFIs, and will be responsible for providing support and coordination during the implementation of the project. GETTING STARTED/NEXT STEPS MFIs will provide all available information to be required to achieve the objectives of this project, including any ratings reports. EXPECTED RESULTS/IMPACT The initial assessment and action plan will lead to the design and implementation of risk management units within each MFI. This will allow senior management to tackle the inherent risks to which they are exposed due to the very nature of their activity, and cultivate an internal culture that rewards sound risk management.