Benefits of Loan Portfolio Audit for MFIs (MicroSave Briefing Note #62)
Sinha, S.
Publication Date: 2008
Published by: MicroSave
Document Type: Other
This note highlights benefits of Loan Portfolio Audit for Indian MFIs.
This paper urges Indian MFIs to use the Loan Portfolio Audit (LPA) to assess and manage portfolio risks. The note identifies the following benefits of LPA for MFIs:
- Pinpoints gaps in policy and procedure and provides solutions ;
- Identifies internal audit and control system risks and provides solutions;
- Solves gaps related to Management Information Systems (MIS);
- Provides customized solutions;
- Establishes transparency and enables fund-raising;
- Assists negotiations for capacity-building inputs with service providers.
The note states that MFIs and their investors use LPA to diagnose and solve problems, and get the best support possible for capacity building and institutional strengthening. Also, LPA is a diagnostic tool that does not judge the quality of an MFI.
The note concludes by urging Indian MFIs to internalize the concept of LPAs and use them as an in-house means to improve their performance, and thus their credit-worthiness with banks.
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