List of Tables, Boxes and Figures 

Preface

1. Introduction

1.1 Four Challenges Facing Microfinance

1.1.1 The First Challenge: Loan Repayment

1.1.2 The Second Challenge: Cost Recovery

1.1.3 The Third Challenge: Accessing
         Commercial Funding

1.1.4 The Fourth Challenge: Attracting Private,
         for-profit Equity Investment

1.2 Levels of Cost Recovery

1.3 Leverage of Donor Funding

1.4 The Relation Between Financial
      Sustainability and Outreach

2. Evaluating MFI Financial Sustainability

2.1 Adjusting Financial Statements to Account
      for the Effects of Inflation and Subsidies

2.1.1 Cost-of-inflation Adjustment Technique

2.1.2 Subsidy Adjustment Technique

2.2 Adjusting Financial Statements to
     Account for Loan Portfolio Risk

2.2.1 Measuring Loan Delinquency

2.2.2 Portfolio Risk Classification, Loan
         Loss Provisioning, and Write-offs

2.3 Setting up Financial Statements
      and Related Information

2.3.1 Presenting Financial Statements to
        Enhance the Evaluation and
        Management of Programme Results

2.3.2 Presentation of the Adjusted Financial
        Statements in Constant Currency Terms

2.4 Evaluating Financial Sustainability:
     Three Profitability Models 

2.4.1 Cost Recovery Model

2.4.2 Return on Equity Model

2.4.3 Modified Subsidy-adjusted
        Return on Assets Model

3. Setting Appropriate Interest Rates:
    The Key to Long-term Viability

3.1 Role of Capital in the MFI

3.2 Capital Adequacy and Leverage

3.3 The Need for Lower Leverage in the
      MFI than in Traditional Banks

3.4 Technical Criteria for Setting Interest Rates

3.5 Political Considerations for Setting
      Interest Rates on Microloans

3.6 Structuring Interest Rates and Fees

3.7 Using Effective Interest Rates to
      Measure Expected Yields

4. Asset/Liability Management in the
    Microfinance Institution

4.1 Net Interest Margin and Gap Management

4.1.1 Gap Analysis

4.1.2 Gap Management in Microfinance
         Institutions

4.2 Liability Management

4.2.1 Calculating Interest Expense

4.2.2 Managing Interest Expense

4.2.3 Structuring Interest Rates on
        Savings Deposits

4.3 Liquidity and Reserve Position
      Management

4.3.1 Risk-return Trade-off

4.3.2 Measuring Liquidity

4.4.3 Cash-flow-based Liquidity Management

5. Productivity Enhancement Tools

5.1 Monitoring Administrative Costs

5.2 Variables that Influence Financial Performance
      and Enhance Productivity

5.3 Administrative Features of Efficient
     Organisations

5.3.1 Staff Accountability and the Use
      of Incentives Systems

5.3.2 Decentralised Decision Making within Branch
         Offices that Operate as Profit Centers

5.3.3 Management Information Systems

5.3.4 Internal Controls and Fraud Risk

5.4 Costing of Financial Products

5.4.1 Structuring the Cost Study

5.4.2 Variable Operating Costs of
        Passbook Savings Account

5.4.3 Fixed Operating Costs of
        Passbook Savings Account

5.4.4 Indirect and Setup Costs of
        Passbook Savings Account

5.4.5 Financial Costs of Passbook
        Savings Account

5.4.6 Total Cost of Passbook
         Savings Account

6. Strategic Financial Planning

6.1 A Business Plan Format

6.1.1 Institutional Analysis

6.1.2 Review of Macro Context

6.1.3 Loan Portfolio

6.1.4 Funding

6.1.5 Operations

6.1.6 Special Projects

6.1.7 Capital

6.1.8 Financial Statements and
        Statistical Appendices

6.2 Generating Streamlined
      Financial Projections

6.2.1 Individual Branch Level
         Loan Portfolio

6.2.2 Individual Branch Level
        Staffing Requirements

6.2.3 Individual Branch Level
         Income Statement

6.2.4 Individual Branch Level
         Performance Indicators

6.2.5 MFI-level Consolidated Loan
         Portfolio, Income Statement,
         and Performance Indicators

6.2.6 Head Office Support Budget

6.2.7 MFI-level Balance Sheet

6.2.8 MFI-level Cash Flow

Bibliography

Appendix