Smart Note: Responding to a Crisis at FUNDESER

> Posted by Laura Galindo
The microfinance crisis in Nicaragua dragged many institutions through the mud. Some institutions made it out and some did not. Without exception though, all of them had some cleaning up to do.
FUNDESER, headquartered in Managua, is a microfinance institution which was deeply affected by the worldwide credit crisis and the internal No Pago Movement across Nicaragua. After experiencing its biggest portfolio growth from 2004 to 2008 with an average growth rate of 70 percent, the institution faced the hard truth that it was not only affected by the domestic downturn, but that it had actually helped to cause it. FUNDESER’s operating model was dominated by a staff incentive policy that rewarded portfolio growth over quality, its credit methodology was  very flexible and demonstrated little adherence to adequate risk management policies and, by 2009, PAR 30 (the amount of past due loans for a period over 30 days) went from a manageable 3.8 percent to an uncontrollable 26 percent.
A new Smart Note, “Responding to a Crisis at FUNDESER”, describes how the MFI dealt with the aftermath of the crisis and overhauled its human resource department in an effort to steer the institution to recovery. FUNDESER’s approach to rebuilding its brand and credibility was to make high ethical standards and sound risk management central to the institution’s corporate culture.
According to René Romero, FUNDESER’s General Manager, easy (but critical) steps could have been taken to prevent FUNDESER’s situation especially with regards to staff capacity building.
This Smart Note shows the thought process and follow-up strategy that FUNDESER’s board members and senior managers implemented. The results, so far, are a glimpse of the light at the end of the tunnel: controlled portfolio deterioration and moderate growth for the institution. Investing in the human element, says Romero, is key.
To learn more about FUNDESER´s strategies to cope and overcome a crisis, please download the Smart Note.
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