A FINANCE RESEARCH PROJECT
Submitted by KOUA ETTIEN JEAN CLAUDE (21015 60012)
Under the Esteemed guidance of DR. SUBIR KUMAR SINHA
Professor in commerce
FINANCIAL PERFORMANCE AND PROFITABILITY OF MICROFINANCE INSTITUTION
(A select study of companies in Ivory Coast)
DEPARTMENT OF COMMERCE
KONERU LAKSHMAIAH EDUCATION FOUNDATION GREEN FIELDS, VADDESWARAM
GUNTUR-522502 ANDHRA PRADESH
This note certifies that Mr. Koua Ettien Jean Claude, who has the university identification number: 2101560012, worked under my direction for the finance research project entitled ” financial performance and profitability of microfinance institution in Ivory Coast ” during the 2021-2023 academic year in partial fulfilment of the Msc (finance and control) program requirements. The student has done original and excellent work to the best of my knowledge and belief. The result embodies that this project has not been submitted to any other university for awarding a degree.
Signature of faculty supervision Dr. Subir Kumar Sinha
Signature of HOD
DR. Sukhavasi Santha Kumari
I hereby declare that the thesis entitled ”financial performance and profitability of microfinance institution in ivory coast ” presented for the award of the master’s degree in finance and control is an original work and the thesis did not form the basis for awarding a degree or an institution for awarding a degree or diploma.
My deep gratitude goes to the professor: DR. SUBIR KUMAR SINHA who is the guide of the research project; he always supported me despite his busy schedule. I am also deeply indebted to my respected head of my business school, associate professor, Dr. SUKHAVASI SANTHA KUMARI for his patience in giving valuable suggestions from time to time.
I take this opportunity to thank the unreserved support that my teachers have often given me.
It is indeed a pleasant task and a small effort to thank all the people, especially some friends, who have contributed to the success of this project.
Finally, I would like to express my gratitude to my parents for their unconditional support and cooperation which made this project possible.
Koua Ettien Jean Claude
TABLE OF CONTENTS
ACRONYM AND ABBREVIATIONS TITLE
CHAPTER 1: INTRODUCTION TO MICROFINANCE
CHAPTER 2: HISTORY OF MICROFINANCE INSTITUTION IN IVORY COAST
CHAPTER 3: REVIEW OF LITERATURE CHAPTER 4: RESEARCH METHODOLOGY CHAPTER 5: ANALYSIS AND INTERPRETATION CHAPTER 6: FINDINGS AND SUMMARY BIBLIOGRAPHY AND REFERENCE
The role of microfinance institutions in Ivory Coast is to finance micro borrowers who do not have financial access and who have no guarantee to offer, which is why microfinance institutions have put in place mechanisms to be able to accurately assess the risks of granting credit to low-income people and it is for some banks to refinance their microfinance institutions and in turn to offer credit to micro borrowers.
The connection with micro borrowers is done through microfinance institutions, NGOs, financial banks or regular banks.
The credits granted to micro-borrowers will be used to finance their entrepreneurial activity; they are capital that allows them to develop their activities.
Micro borrowers are NGOs, small businesses, low-income people or groups of people who can repay borrowed credit quickly. Loan amounts vary depending on the size of the business or activity.
Microfinance in Ivory Coast is dominated by macroeconomics in relation to the informal sector, by informal sector we define sellers in small markets, fairs; we see that small traders sell products and earn profits but they keep this money at home what is called in economics treasurer, this means that take profits from capital and keep on either or at home and no one can benefit from it, therefore the level of overall savings in Ivory Coast is very low, savings therefore means investment because the gain collected from the investment therefore makes it possible to lend to other companies to invest so we have a global credit problem in ivory coast so how can we solve this problem, the answer that emerges to this question is microfinance.
Microfinance: it is giving small loans to individuals or companies in difficulty, and this business is organized by microfinance institutes, it will therefore be necessary to remember that microfinance has several approaches, it is therefore a question of finding a way to lend money to the poor, under these conditions what should be done, the confidence to repay the loan money within a reasonable time by carrying out a credibility study and analysis, but at the level of microfinance in Ivory Coast, we are dealing with the poor, how can we analyse this credibility, the idea that emerges from this is that microfinance prefers to lend money to groups of people or NGOs in order to be able to repay the loan as soon as possible at a rate that could suit the purchaser, theoretically there is the transfer of risk from the bank to the individuals who borrow this money, this implies that it is usual for the bank to put pressure on the individual or group of individuals who requested the credit so that they repay the credit in microfinance. We are talking about group or individual credit; it is up to the members of the group who have borrowed the money to repay each week or each month.
based on this fact, the microfinance system makes it possible to lend money to start-ups and small businesses; to make the link of the informal sector in Ivory Coast we can say that at the level of the informal sector many companies and start-ups do not have access to the bank for lack of credit card, debit card that is why Africa Emergent Investment (AEI) offers different products organized in a gradual way, we have group credit, group micro credit, micro insurance, individual micro credit, and micro leasing. Africa Emergent Investment goes to the customers, it has central offices, the central office in Abidjan (economical capital of Ivory Coast) and the other offices inside the country. It offers short- term loans to customers and with weekly repayment, by offering them offers, everyone is sceptical and even some ask what is the counterpart to be able to have the credit, the customers do not need to prove their credibility and the microfinance asks them to fill in documents provided that the customers are grouped in NGOs or association and or mutual regardless of the number of people it is the strategy to send customers to a banking system, after these people have taken this credit, microfinance offers them bank savings products at a rate of interest much less in order to be able to repay as soon as possible. If the customer wants to take out a cheaper loan, he will have to take individual loans and have a minimum of 6 months of savings. This justifies that by saving the customer entrusts his savings to the bank.
The major problem of microfinance in Ivory Coast is that customers are not regular in the contribution of savings and repayment of the loan. Our research project on microfinance is based on risk analysis ,financial performance and profitability on the client and the portfolio of the microfinance institution and this is where the rating and in particular the scoring comes in, it is really a mathematical instrument which makes it possible to calculate the risk on the client, to analyse the risk on the client microfinance gives a questionnaire to the client to have precise information on the client with regard to his solvency and
according to the answers to the questions the microfinance grants ratings to its clients by a study of statistics and reliable data .
By allowing microfinance institutions to target credit to the client individually, we also allow them to estimate the credit in their portfolio, this allows them to know what is the overall risk of microcredit.
ACRONYM AND ABBREVIATIONS
AEI (Africa Emergent Investment) NGO (Non-Governmental Organization)
CNM (National Commission for Microfinance)
UNACOOPEC-CI (National Union of Savings and Credit Cooperatives of Ivory Coast)
COOPEC (Credit Cooperatives of Ivory Coast) CFA (currency of the French Colonies in Africa). MFI (Microfinance Institution)
IMF (Institution microfinance) SME (small and medium enterprise)