MYC4 conducts annual reviews of the existing providers once a year. The annual review is in essence an assessment of the overall health of the partner organisation and processes – similar to a new due diligence.
The purposes of the review include:
- To ascertain the strength and health of the partner institution,
- To evaluate the partnership and set strategic targets and plans for the next period,
- To explore new ways of developing the partnership,
- To identify areas for improvement and make management recommendations.
The 2011 Annual Reviews were carried out earlier this year by the MYC4 East Africa Director, Eric Naivasha.
The following key areas were assessed:
- Ownership and Governance Structure
- Management and Staff Capacity
- Products and Services
- Funding Composition
- Information Management
- Procedures and Internal Controls
- Portfolio Performance
- Analysis of Risk Exposure for MYC4
Following the annual reviews, each of the providers was given a report with the main findings, recommendations, and a score on a scale of 1-10 – a score which feeds into their risk rating on the MYC4 platform (under the parameter ‘Due diligence score or annual review’). The highest score in this round of reviews was 7 (Gatsby Microfinance Ltd, Rwanda Microfinance Ltd/Micro Africa Rwanda, and Tujijenge Tanzania) while the lowest score was a 3 (GrowthAfrica, and Premier Resource Consulting). You can see how each provider is rated by clicking on the stars on the platform or by looking at their individual profiles.
For those who are yet to be familiar with the risk rating, it is a 5-star rating system which has been developed to assist investors in easily evaluating the different providers. A high risk rating (i.e. many stars) indicates a strong track record and a good alignment of the partner’s incentives with the interests of the investors. A low risk rating (i.e. few stars) indicates a weaker track record and lower level of alignment between the partner and the investor incentives.
MYC4 also conducts bi-annual spot checks of the providers where focus is more on verification of the data on the MYC4 platform rather than institutional health (e.g. that the data as it appears on the MYC4 platform is the same as that on the providers’ records, and that the loans are actually given to bona fide clients). You can read more about the spot checks in Titus Kuria’s blog posts MYC4 Spot Checks and MYC4 Spot Checks Q2/Q3 2011.