November 2009 - Women's World Banking (WWB) is a global network of 40 microfinance institutions (MFIs) working in 28 countries to bring financial services and information to poor entrepreneurs, especially women. The network serves 20 million micro-entrepreneurs, over 70% of whom are women. WWB works closely with its network of MFIs, providing them with advisory services to expand their client outreach, strengthen their organization, and create products that reach poor women entrepreneurs in urban and rural areas.

In November 2009, with support from the Citi Foundation, a member of WWB's Capital Markets Group conducted a Financial Risk Management (FRM) training at Microfund for Women (MFW). MFW is a WWB affiliate and one of the leading MFIs in Jordan with the mission to harness the productive capacity of microentrepreneurs through the provision of sustainable financial services. Since its inception, MFW has focused on providing credit facilities to women as they comprise a large portion of those under-served by the financial markets. MFW currently has over 35,000 active borrowers, 93% of whom are women, with an average loan size of USD 417 and loan portfolio of over USD 15 million.

The primary objective of WWB's visit was to work with the senior management team and Board of Directors to strengthen MFW's capacity to assess financial risk; support the team in the establishment of institutional risk management structures; assist in creating periodic risk management reports; and develop FRM policies and systems for measuring and monitoring these risks. The training utilized the WWB-Citi FRM Toolkit, which was developed in 2005 through a collaboration of the two organizations to train MFIs how to create policies and procedures to identify and manage financial risk. As a result, MFIs are able to strengthen their organizations; better position themselves to investors thus increasing access to more diverse sources of funding; and grow in a more responsible and sustainable manner.

The relevance of financial risk management concepts and techniques continues to increase. With the commercialization of the microfinance sector, MFIs are becoming increasingly more accountable to new types of investors. Additionally, the financial crisis has created more volatility and in some cases reduced liquidity. Given these factors, MFIs need to develop stronger, more sophisticated systems to assess, manage, and report their financial condition and risks.

The training was complemented by the participation of two local Citi employees in Amman, Jordan who provided a detailed explanation of Citi Jordan's own financial risk management processes, focusing on governance, liquidity, and liability management. This information provided MFW with a more complete picture of the FRM process and gave them invaluable insight into how commercial banks manage risks. The Citi volunteers also provided informative perspectives on Citi Jordan’s credit due diligence analysis and advice on how MFW can best approach and position itself to commercial banks.

Ala Qumsieh, Senior Relationship Manager at Citi Bank Jordan believed their participation was quite successful. "The event was delightful. WWB is doing a great job by supporting MFW. Participants attending the training exhibited a high level of understanding of the issues being taught, to the extent they were even better than some private sector profit firms; something not usual in the local market. They were very engaged and interactive. They asked very good questions and knew their business very well. I think they are on the right track for growth and success. I think our presentation was fruitful and helped them better understand how banks think when it comes to approving credit. Above all, I think it was great to be part of Citi's philanthropic activities."

Many of the concepts discussed during the training were already familiar to MFW staff, but thinking of them in the context of risk management allowed them to formalize their systems and decision making processes. Furthermore, the practicality of the FRM Toolkit helped MFW to tailor the models and policy templates to their particular needs. WWB also helped MFW further develop its skills in such topics as calculating the cost of funds and creating benchmarking models.

Lama Zawati, the Chief Financial Officer of MFW was very pleased with the training. According to Ms. Zawati, the most important skills and knowledge she obtained included:

• Linking risks to key performance indicators that drive financial success and enable MFW staff to monitor real impact;
• Ensuring that company forecasts and cash flows are risk adjusted, which is essential for delivering accurate financial statements to MFW's Board and optimizing profits and loss;
• Understanding MFW's financial position and performance relative to microfinance industry standards;
• Adjusting costs for inflation and the subsidized cost of funds;
• Applying financial analysis tools in order to improve decision making and program performance;
• Calculating interest rates effectively; and
• Understanding the cost of credit from the borrower's perspective.

WWB will continue to work with MFW's senior management team and Board of Directors as they implement these new risk management policies and models. After this training and with WWB and Citi's continued support, MFW staff will have the necessary tools in place to understand, measure, and monitor financial risks; and then act accordingly.

Sa'ed Foudeh, the Chief Financial Officer at Citi Jordan reflected on his experience as a volunteer: "Participating in this training program was an excellent experience for us. The WWB representative appreciated our presentation and the contributions we provided, especially in regard to some of the practical aspects of managing financial risks and accessing credit markets. MFW is doing an excellent job in terms of supporting the needs of their community, and I believe that by sharing our practical experience and knowledge with them, they will be able to better manage their business and serve their local community more effectively, especially during this recent financial crisis."