MATCHING GRANT 
ENTERPRISE FOR HEALTH 
FINAL EVALUATION 
Submitted to: 
Thomas Kennedy 
Microenterprise Development Project Officer 
Office of Private and Voluntary Cooperation 
Bureau for Humanitarian Response 
1300 Pennsylvania Avenue, N .W. 
Washington, D.C. 20523 
Submitted by: 
Susan Waterfield) Consultant 
325 N. West End Avenue 
Lancaster, PA 17603 
717/295-9292 
and 
Judith Painter 
3918 Bartely Drive 
Sacramento, CA 95822 
916/492-1677 
On behalf of: 
Leoncio Farfan and staff of CREDIVISION Peru 
Sammy Mwangi and staff of SEDA Tanzania 
Dorothy Katantazi and staff of MED-Net Uganda 
Dan Nore!!, Lisa Jackinsky and other headquarters and regional staff 
August 2001 
ADP 
ASODECO 
BDS 
CIDA 
co 
DAP 
DFID 
DIP 
EA 
EDPYME 
FAIDA 
FFH 
FFP 
FY 
GWU 
HIV/AIDS 
HR 
INAFI 
LACRO 
MBB 
MED 
MED-Net 
MFI 
MDG 
MG 
NGO 
NOVIB 
MIS 
PAR 
PRESTO 
SBS 
SEDA 
SEEP 
SG 
TAMI 
US AID 
VB 
WV 
WVI 
WVP 
WVRD 
WVT 
wvu 
wvus 
ACRONYMS 
Area Development Program 
Asociacion para el Desarrollo Economico <lei Peru 
Business Development Services 
Canadian International Development Agency 
Credit Officer 
Development Activity Proposal 
Department for International Development 
Detailed Implementation Plan 
East Africa 
Entidad de Desarrollo de la Pequena y Micro Empresa 
Finance and Advice in Development Assistance 
Freedom from Hunger 
Food for Peace 
Fiscal Year 
George Washington University 
Acquired Immune Deficiency Syndrome 
Human Resources 
International Network of Alternative Financial Institutions 
Latin America and Caribbean Region 
Microbanking Bulletin 
Microenterprise Development 
Microenterprise Development Network 
Microfinance Institution 
Microenterprise Development Group 
Matching Grant 
Non-governmental Organization 
Netherlands Organization for International Co-operation 
Management Information System 
Portfolio at risk 
Private Enterprise Support, Training and Org. Dev. Project 
Superintendent of Banks 
Small Enterprise Development Agency 
Small Enterprise Education and Promotion Network 
Solidarity Group 
Tanzania Association of Microfinance Institutions 
United States Agency for International Development 
Village Bank 
World Vision 
World Vision International 
World Vision Peru 
World Vision Relief and Development 
World Vision Tanzania 
World Vision Uganda 
World Vision United States 
TABLE OF CONTENTS 
EXECUTIVE SUMMARY 
A. Introduction .. . .... .. ... ...... .......... .... ......... ... ... ..... . ..................... .... ....... 1 
B. Purpose of the Evaluation ................... .. .. ... ... ... .. ... . ............... . ............... 1 
C. Summary of Findings ...... .. . .............. . ................................... .. ...... .. ..... 2 
SECTION I: CREDIVISION - PERU 
A. Introduction ..... .... .... .. .... ... .............. .... .. ... .. . ....... .. ........ ............... ..... 14 
B. Implementation ·of the Matching Grant ..... .... ... ..... . ...... ................ ..... . ... .. .... 15 
C. Program Design and Implementation .. ...... ..................... . ................... ..... .. 22 
D. CREDIVISION's Institutional Development ............. ............... .. .. .. .......... 25 
E. Major Lessons Learned and Recommendations .. ..................................... .. .. 33 
SECTION II: SEDA - TANZANIA 
A. Introduction ........... . .... .............. ........................ ..... .. . ...... ... .. .... .. ..... 36 
B. Implementation of the Matching Grant .. ... .. ...................... ........................ 36 
C. Program Design and Implementation .... ..... ... .. ....... ....... ....................... ... .42 
D. SEDA's Institutional Development ...... ... .................................. .. .... ... .... .48 
E. Major Lessons Learned and Recommendations .... .............. ..... ..... . ..... .. .... .. 59 
SECTION III: MED-NET - UGANDA 
A. Introduction .............. ... . ..... ........ .. ............. .. ... ..... . ... .... ....... ............. 63 
B. Implementation of the Matching Grant. ........................................ . .......... 64 
C. Program Design and Implementation ....... .. ........ ......... . .. ......... .. ............... 70 
D. MED-Net's Institutional Development .. .. ................. ..... . ... .. .. ......... ........ . 76 
F. Major Lessons Learned and Recommendations ...... .................. .. ........ ...... ... 85 
SECTION IV: SUMMARY OF IMPACT ASSESSMENT 
A. Introduction .... ..... .... ... ... ..... .. .... ... ........................ .. .... .. . ... ... .. .. ..... .. 87 
B. Evaluation Methodology ..... ............. .. . .. .... .. . .. .......... .. ...... .... .............. 87 
C. Definition of Findings ............... ..... . ......... ....................... . ............ ...... 88 
D. Discussion of Findings ... .. . .. ... ......... .. ..... ...... .. ..................................... 89 
SECTION V: THE MATCHING GRANT AND THE WORLD VISION PARTNERSHIP 
A. Introduction ... .. .... .... ......... ..................... .................. . ...... ................ 96 
B. Implementation of the Matching Grant .................................. ... .... ..... .... .. 97 
C. Strategic Partnerships Between World Vision and the Local 
MFis .. ... ........ ... ... ... ......... .. .. ............. .............................. ....... .. .. .. 105 
D. WV Organizational Management and Institutional Capacity Building ............. 106 
E. Enterprise for Health Matching Grant and Food for Peace Initiatives .......... ...... 116 
F. Major Lessons Learned and Recommendations ........... . .. .. ........................ 119 
EXECUTIVE SUMMARY 
A. INTRODUCTION 
In September 1996, World Vision US was awarded a Matching Grant known as Enterprise for 
Health. The goal of the 6.5 million program, equally funded through USAID and match, was to 
improve the socio-economic and health status in poor communities. The grant is scheduled for 
completion in September 2001. Funds were granted to microfinance institutions in Peru, 
Tanzania and Uganda as well as to the WVUS headquarters for use in all regions where WV is at 
work. Originally, the grant focused on a strategy which directly integrated basic community 
health services with MED by targeting volunteer health workers clients and working with 
communities to pay for health services. Interest grew in developing sustainable micro-finance 
institutions with replicable methodologies, leading to the replacement of a direct health focus 
with a strategy focused on credit. 
The goals and purposes of the grant are: 
1. To capitalize and strengthen newly created and developing microenterprise financial and 
non-financial service institutions in Peru, Tanzania and Uganda; 
2. To assist in the development of new and existing micro-enterprises; and 
3. To provide models for the World Vision Partnership of effective micro-enterprise 
development activities and their integration into existing programs. 
Partners in the implementation of this grant include ASODECO/CREDIVISION in Peru, 
established in 1994; Small Enterprise Development Agency (SEDA) in Tanzania, established in 
1996; and Micro-Enterprise Development Network (MED-Net) in Uganda, established through 
the Matching Grant in 1996. All three MFis have achieved greater outreach than originally 
anticipated in the Detailed Implementation Plan (DIP). Both the original target areas and the 
broader institutions are examined in the evaluation. 
Over the five-year period, an impact evaluation was conducted by George Washington 
University. The results of the study are summarized in Section IV. 
B. PURPOSE OF THE EVALUATION 
A final evaluation of the MG was conducted in April and May 2001. The evaluators were tasked 
with providing information on the following : 
1. Accomplishments against targets established in the DIP; 
2. Effectiveness and impact of the program design and implementation; 
3. Impact of the strategic partnerships between the MFis and technical resources in the MED￾N etwork; and 
4. Change in WV's organizational management and institutional capacity in MED as a result of 
the grant. 
Matching Grant Final Evaluation Pagel 
C. SUMMARY OF FINDINGS 
1. CREDIVISION - Peru 
ASODECO, the Association for Economic Development of Peru, was established in 1994 as a 
non-profit organization. In April 1998, a law was passed in Peru creating a new organizational 
structure, the EDPYME, a for-profit banking institution controlled by the Superintendent of 
Banks. After lengthy deliberation, jt was decided that ASODECO would become an EDPYME. 
Therefore, the second year emphasis of the MG was on the creation of EDPYME 
CREDIVISION, capacity building and significant growth in outreach. The focus of the third and 
fourth year was primarily on the creation of CREDIVISION, which was officjally established in 
June 2000. The fifth and final year of the grant has permitted CREDIVISION to gradually 
increase outreach and sustainability while strengthening institutional capacity. 
The final evaluation, which took place in May 2001, showed that financial sustainability was 
92.4% in the Cusco branch; the DIP target was 100%. For CREDIVISION as a whole, financial 
sustainability was 75.3%. Financial sustainability has taken longer to achieve due to stait up 
costs associated with a new institution, decreased lending during the start up period, and 
generally slow growth. CREDIVISION staff is focused on the goal of financial sustainability, 
and expect to reach 100% early in FY02 by increasing portfolio per credit officer and continuing 
to minimize expenses. 
The value of the revolving loan fund, targeted at $565,000, is more than $1 .2 million. Loans 
outstanding totaled $571,168, $377,750 in Cusco and $193,418 in Lima. The MG provided a 
total of $565,000 in loan funds, $335,000 from USAID and $230,000 from the match. Other 
measures of the effectiveness and sustainability of the institution include institutional 
registration, effective systems and policies, and an active and knowledgeable board. 
The current value of the loan portfolio per credit officer is $75,550 in the Cusco branch, slightly 
exceeding the target of $75,000. For CREDIVISION as a whole, loan portfolio per credit 
officer is $63,463 . In Cusco, credit officers manage 214 clients, compared to the DIP target of 
193 . CREDIVISION's current goal is 240 clients and an $80,000 loan portfolio per credit 
officer by the end of the FY. 
In the area of assisting in the establishment and development of new and existing micro￾enterprises, since October 1996, ASODECO/CREDIVISION assisted 4,843 clients (4314 in 
Cusco) with 13,786 loans (13 ,257 in. Cusco), well over the goal of 1978 successful micro￾enterprises and 6530 loans disbursed. 
The effectiveness of program design was assessed by exammmg the credit portfolio. 
CREDIVISION offers individual and solidarity group loans, and intends to implement a 
community banking product in FY02. Sixty-nine percent of CREDIVISION's loans are to 
individuals, and 31 % are solidarity group loans. Although loan sizes and required guarantees 
differ, CREDIVISION uses basically the same approach for both individual and solidarity group 
clients in terms ofloan processing, loan analysis, and CO-client relationship. 
Matching Grant Final Evaluation Page 2 
CREDIVISION staff is challenged by the tension between mission and financial sustainability. 
The emphasis of their vision is on increasing impact in the lives of the very poor, and their long￾term goals regarding the mix of products reflect their mission and the need for diversification to 
achieve sustainability and scale. However, the transformation to a regulated financial institution 
has also made sustainability more difficult by driving up costs. CREDIVISION's response has 
been to focus more heavily on larger loans to individuals rather than smaller loans to groups, 
indicating also that overall clients are becoming less poor. While some clients are moving into 
individual lending as their businesses grow, many are new clients with larger businesses. 
Regarding outreach and efficiency, the organization surpassed the target of 1349; they are 
currently working with 1499 clients. However, the organization faces several challenges to 
increasing operating efficiency, which declined dramatically when CREDIVISION was created 
due to the high cost of establishing and maintaining a formal financial institution. The operating 
cost ratio at 113% is still extremely high, surpassing the DIP target as well as CREDIVISION's 
own target. Cusco's operating cost ratio is slightly better at 90.6. One major contributing factor 
to low operating efficiency is the low CO to client ratio. 
CREDIVISION's high portfolio quality figures reflect the rigor demanded by the SBS for 
EDPYMEs, and the effects of the transition from ASODECO, since CREDIVISION accepted 
only the best of ASODECO's clients. The portfolio at risk of 1.65% puts CREDIVISION among 
the best microfinance institutions. 
CREDIVISION is primarily funded at present through the MG, and is steadily increasing its 
reliance on earned income. By the end of the FY, CREDIVISION will need additional loan 
funds, and managers plan to access $500,000 for the next FY. Once the institution generates a 
profit it will be in a better position to diversify its funding sources. 
Program monitoring and evaluation systems permit the regular review of program quality and 
impact by branch. Lending activity and portfo)jo quality is tracked through an integrated system 
called CAUTIVO. Although information is fairly reliable, it contains a number of errors and 
requires a substantial and regular time investment on the part of the General Manager. The 
reports prepared through CAUTIVO and on EXCEL spreadsheets are prepared to meet the needs 
of various users. Since various stakeholders (SBS, MED-Network, USAID) require different 
information and types of reports, the process of preparing reports is time consuming. 
Key Recommendations: 
1. CREDIVISION must seriously and creatively consider their mission as well as the 
potential market to determine what strategy might offer the best hope for long-term 
success. A vision for outreach (many very poor clients) may spur the institution to 
greater levels of innovation and efficiency while targeting a lower market than other 
EDPYMEs. At the same time, staff must think strategically about balancing the 
conflicting needs presented by high costs, poor clients, a highly regulated environment, 
and a new organization. 
2. The current products and methodology should be assessed in order to determine 
how to improve them to better meet client needs. 
Matching Grant Final Evaluation Page J 
3. The lending process can be made more efficient, especially in the case of SG loans. 
Such an assessment should also help to better meet client needs, as noted in the 
recommendation above. 
4. Until the institution is more efficient and sustainable, both current branches are 
profitable, and current loan products are made more responsive and efficient, it 
would be best to postpone CREDIVISION's entry into community banking. Entry 
into this market now is likely to stretch institutional capacity too much at an already 
difficult time. 
5. In order to move steadily toward achieving its vision and mission (described below), 
CREDIVISION may want to consider alternatives to increasing financial 
sustainability and operating efficiency. 
6. In expanding, and creating a structure to support expansion, CREDIVISION 
should move ahead very carefully given the expense, competition and economic 
environment. 
7. Consider designing regular Board training/retreats in order to further build the 
board's understanding and capacity, to inform members more fully, and to increase 
members' ability to work together. 
8. CREDIVISION should consider designing and implementing more formal training 
sessions for new credit officers in order to complement the existing system. 
9. Organizational review and analysis, including a review of vision and mission, is a 
very important process that can normally be implemented during the business 
planning process. 
10. Simplify monitoring if possible, incorporating all necessary activities into 
CAUTIVO rather than operating multiple systems. 
11. Determine the importance of impact evaluation to the institution, balancing need 
with costs, and identifying processes for carrying it out. 
• Cultivate linkages as an investment in institutional capacity. 
2. SEDA - Tanzania 
Since its establishment in the district of Arusha in 1996, SEDA has opened three branch offices 
and serves a client base of slightly over 10,000. It is the largest of the three funded MFis and 
owes much of its success to its executive leadership and committed staff. Unanticipated growth 
in new areas has affected financial sustainability, with the overall institution at 75% and Arusha 
(the originally targeted area) at 104%. The target for this year is 87% for the overall institution, 
which may be reached given the trends for the year. The average Joan balance outstanding is at 
$1,332,000, 16% above the DIP target. Average loan size of $183 is considerably smaller than 
the original DIP and business plan projections of $322, primarily due to the influx of new clients 
bringing down average loan size. 
Operating efficiency in SEDA overall reflects a positive trend, with operating cost ratio reaching 
the target of less than 55%, cost per loan decreasing from $56 in 1998 to $47 in 2001 and client 
to CO ratio increasing from 292 to 384. The Arusha branch shows a higher CO to client ratio of 
426 and a higher portfolio per credit officer of over $63,000 compared to SEDA overall at 
$49,000. The original DIP target is $65,000, which reflects the higher projected average loan 
size. 
Matching Grant Final Evaluation Page 4 
P_ortfolio quality is impressive with a PAR of 7.7% for the entire institution, and 3% for Arusha 
compared to the DIP target of 6%. This is a major improvement from a high of 16% PAR in 
1998. Interviews with staff note that several steps were taken to address delinquency. Some of 
the more significant ones include standardized credit officer (CO) training, having CO present 
during payment meetings, improved MIS and feedback to individual COs, weeding out the risky 
groups and individuals. 
SEDA's main loan product, a combination of community banking and solidarity group lending, 
would benefit from additional refinement. Currently, many of the efficiencies of community 
banking are lost due to the business analysis requirements that are more akin to those required 
for solidarity group lending. At the same time, the solidarity groups are burdened with some of 
the self-management issues more appropriate for CBs. SEDA may want to consider working 
towards a more conventional SG loan approach, although a community bank approach would be 
more appropriate for the ADPs. WVT may be willing to take on this challenge and be the 
learning laboratory for SEDA to develop a rural credit product. SEDA may want to consider 
grafting onto an existing infrastructure to deeply penetrate hard to reach areas. 
SEDA' s vision of transformation into a regulated body appears to be the driving factor in its 
organizational development. While such a vision helps steer an emerging MFI towards greater 
levels of professionalism, it does not necessarily drive an institution towards the greatest possible 
outreach in terms of breadth or depth. Indeed, trying to serve the needs of a regulated institution 
could be at odds with the requirements for serving larger number of very poor people. 
A staff of 56 runs SEDA, of which 27 are credit officers. Additional credit officers can be hired 
without additional costs in support and management staff. SEDA feels this structure was 
necessary to build the client base up from 2,046 in 1998 to over 10,000 in 2001. The 
organization is very flat, allowing for quick decisions at the branch level in matters regarding 
portfolio quality or accounting issues. A branch blueprint plan is now under development that 
will allow for faster expansion and permit the branch to more quickly attain sustainability. 
The board, made up of seven individuals of which three are independent from WVT, views itself 
as an independent body and has been well trained in the technical aspects needed to govern and 
craft relevant policy. SEDA faces a major organizational challenge over the next few months; 
the executive director is leaving and will take on the regional technical advisor role full-time for 
the World Vision partnership in October 2001. The operations manager has been named interim 
director. 
Other departments within SEDA are well developed. The human resource department has a 
human resource and training manual. The CO incentive system is effective in keeping top 
producers in the field, but shows some inequities. The internal audit department has recently 
developed audit procedures and policies, which may benefit from an additional review from the 
WV technical team. Internal audits are regularly scheduled although it has been recommended 
that spot audits start at the branch level. 
Matching Grant Final Evaluation Page 5 
Financial management is sound overall. A financial manual was completed in June 2000, 
documenting all accounting, administrative policies, financial and statistical reporting, budgeting 
process, cash management, forecasting, and external audits. The main challenge is liquidity 
management between the various branches. Additional training in this area is needed by the 
finance director and operations manager. 
The board has made the strategic decision this year that no more grants will be accepted by 
SEDA Operating expenses will now be met through generated financial income. Once 
transformation has taken place, SEDA will secure future loan funds through the use of member 
savings and equity investments. They expect transformation to occur within the next three years. 
Use of member savings for loan funds is a major step for an MFI and should be approached with 
great caution. 
SEDA uses three systems in managing financial information: TMS, SUN and the in-house 
EXCEL spreadsheets. This overlap increases confidence that no information is missing or 
inaccurate, and the latter systems tend to create more user-friendly reports. Maintaining three 
systems will soon prove too costly and time consuming for SEDA An in-depth paper audit of 
the loan delivery, collection and tracking system is recommended to reveal bottlenecks and 
redundancies in the current system. 
Key Recommendations: 
1. Refine methodology. Due to the urban and peri-urban nature of SEDA's operations, and 
client characteristics, a SG loan product is well suited for its clientele. 
2. Monitor costs and benefits of groups self record keeping. SEDA should monitor this 
additional layer of control carefully for costs to the client and to the CO in terms of time 
spent in training and meetings 
3. Explore a classic village bank model for ADPs. If SEDA is intent on working in the 
ADPs, they may want to explore a more classic village bank model which works with 
larger groups (20 or more), where members are responsible for all screening of other 
members and their businesses. 
4. Use World Vision as learning laboratory for the community banking product in 
order to protect SEDA while the client base is built and the product and systems 
developed. 
5. In conjunction with the idea above, explore grafting onto existing infrastructure in 
rural regions. SEDA may want to consider using other infrastructure that can handle 
cash disbursement and collections (e.g. postal banks,, lottery outlets, credit unions). 
6. Promotion of the internal account depends on the organization's vision for the 
group. If they see the group as slowly gathering its own asset base that will supplant 
some demand for services from the MFI, then the internal account is an appropriate 
product to promote. However, if the MFI wishes to have the group more dependent on 
the institution for lending services, then the internal account is counter productive. 
7. SEDA should be cautious when considering entering into health insurance. SEDA 
appears to taking the right course in considering a partner-agent model, which would 
limit their role to linking clients with insurance companies. 
8. Consider loan-life coverage product. As the insurance industry develops, SEDA may 
want to consider contacting insurance providers to enter into loan-life coverage. 
Matching Grant Final Evaluation Page 6 
9. SEDA's clients, primarily microentrepreneurs with full-time businesses, would 
benefit from BDS linkages. Assuming client demand exists, SEDA may want to 
encourage local BDS centers to provide training more suited for their clients; SEDA 
could act as the agent. 
10. A Credit with Education approach such as that promoted by FFH has proven both cost 
effective and high impact in terms of improved health and nutrition status among clients. 
SEDA may want to further investigate this Credit with Education approach. 
11. The time COs spend in business assessment of assets, income and cash flow has 
questionable value when determining credit-worthiness of the clients, except for the case 
of larger loans (e.g. over $500). SEDA may wish to make its loan assessment 
application more streamlined. 
12. If SEDA wishes to attain serious scale using the community bank approach, each 
group should have more members, especially in rural areas where travel time between 
groups becomes significant. Larger membership has been shown to work in several 
African environments, as long as loan processing is streamlined and the peer guarantee 
mechanism is in place. 
13. Reconsider the repayment schedule for select areas. 
14. Additional support in financial management may be needed during the transition to 
a new executive director. The WVT director of finance serves on the SEDA board and 
may be in a position to extend additional support in the area of financial management. 
15. SEDA may want to expand the number of variables that dictate the incentive 
scheme[CWWl]. 
16. SEDA management needs further training in liquidity management 
17. Use of member savings for loan funds is a major step for an MFI and should be 
approached with great caution. 
18. While this approach appears to work well for the present, SEDA must consider the costs 
of operating essentially three systems if significant scale up occurs (e.g., 50,000 to 
100,000 clients). 
19. A new MIS, Emerge, is slated for introduction to MED programs. WV should carefully 
consider the expedience of this change, as SEDA has already invested considerable 
time adapting the cuITent TMS system and has reached a high level of confidence in its 
results. 
20. An in-depth paper audit of the loan delivery, collection and tracking system is 
recommended to reveal bottlenecks and redundancies in the current system. 
21. Spot audits at the branch level should be instituted over the next year, as SEDA is 
poised to grow considerably. 
22. Reduce the internal auditor's role in business/loan analysis. 
23. Provide technical review of internal audit procedures/policies. The internal auditor 
expressed interest in receiving technical assistance in review and implementation of the 
internal audit policies and procedures. 
3. MED-NET - Uganda 
MED-Net (Micro-Enterprise Development Network) was founded in 1998 as a limited company 
by guarantee, registered under Ugandan NGO laws. Currently MED-Net serves 6700 clients in 
the districts of Kampala, Mpigi, Mukono, Masaka and Rakai, expanding far beyond the original 
districts ofMasaka/ Mukono. The loan fund as of the evaluation was $595,065, which is below 
Matching Grant Final Evaluation Page7 
the DIP targets of 665,000 mainly due to the much lower than anticipated community bank loan 
size ($164 versus the DIP projection of $322). Lower loan growth and higher outreach 
contributed to a much lower than expected financial sustainability rate of 50%, compared to 
103% in the DIP. To address sustainability needs, MED-Net has introduced higher end loan 
products, with three types of SG loans and individual loans. This will open a new market for the 
institution but may steer it away from its original mission to serve the very poor. 
Operating cost efficiency is a major challenge for MED-Net, with the current operating cost ratio 
at 75%. This is line with the business plan target of 70%, which is more realistic than the 
original DIP target of 35%; however, this ratio must still be lowered significantly to move 
sustainability forward. One area of improvement may be increasing CO to client ratio, which is 
now only 290. This low ratio is largely attributable to the costly processing time for all loans, 
even community bank loans which due to their small size should have minimal analysis. This 
type of analysis was introduced in an effort to reduce the high PAR of 18% that existed in year 
three of the grant. Current PAR is very good at 7%, although this is mainly attributed to 
introducing staggered loans, reducing the client and portfolio ratio for each CO, increased skill 
level of CO in terms of follow up, timely and accurate information given to CO and branch 
managers, branch managers relieved of CO duties, and using local leaders to give character 
references for all clients. 
MED-Net is currently working in several ADPs and plans to take over all MED-related activities 
in the area from WVU. In order to position itself for a more rural clientele, MED-Net is 
negotiating with the postal bank system to broaden the delivery system. This should prove to be 
significant in allowing MED-Net to capture this rural market. 
The organization, while relatively young, has created a sound infrastructure and staff This is 
largely due to the efforts of the director, assistance from the RTA, and technical assistance from 
the MED Partnership. MED-Net employs a staff of 56, of which 28 are credit officers. While 
this is relatively high given a clientele of 6700[*2), they are well positioned to grow. An incentive 
system and formal training program for COs is in place. Documented procedures for human 
resources and a training program for each loan program exists; COs are now hired for specific 
types of loan products. Unlike SEDA, MED-Net is still highly centralized in most functions, 
although plans to decentralize the portfolio planning and accounting systems more to the branch 
offices over the next year. 
MED-Net's current funding base is comprised of commitments from the MG, PRESTO and 
private sponsorship from WVUS and other support offices. Current total assets equal 
$1, 179,451. MED-Net expects to use retained earnings, intermediate savings and attract private 
investments as a way to increase the loan fund . Savings intermediation is not advisable until the 
operating cost ratio is decreased to at least 30% and PAR lowered to at least 5%, and they have 
successfully used commercial loans. Financial management and audit systems are in place, 
although additional training in liquidity management and a review of the audit policies is 
advisable. 
The computerized portfolio tracking system TMS is now being installed at MED-Net. An Excel 
system is still used to produce weekly and monthly portfolio reports by branch and by CO. Once 
Matching Grant Final Evaluation Page 8 
the TMS has been fully adjusted to MED-Net's needs, the two systems will run together for three 
months to verify accuracy and increase confidence in the new system. MED-Net may want to 
consider a paper audit to review the consolidated system for bottlenecks or redundancies. 
Several key performance indicators such as portfolio yield and client dropout are now captured 
only at the CO level, and should be incorporated in organizational statistics. 
Key Recommendations: 
l. MED-Net must be vigilant against moving away from serving the productive poor in 
favor of serving higher end customers in their quest for sustainability. 
2. MED-Net should move quickly to a relationship with postal banks. Such an arrangement 
could open up rural markets with hard to reach populations and allow MED-Net to capture 
this market. 
3. MED-Net should begin to set up separate costing and performance tracking for each 
product over the next year. 
4. Consolidate loan appraisals: community bank loan analysis and business verification 
should be left to the group. The individual and solidarity group credit interview should be 
shortened considerably. 
5. Clients should receive some return on all voluntary savings to lower effective interest rates 
and provide an additional service to clients. 
6. Hiring of additional staff should be halted until operating cost ratio declines. Increase 
client to credit officer ratio to DIP targets. 
7. Additional time spent in collecting impact baseline data and analyzing individual community 
bank loans contributes additional cost and lowers client ratio rate. MED-Net should review 
the need for and value added of this facet of operations. 
8. Reserve ratio can be reduced, as loan loss is much lower than anticipated. 
9. Portfolio quality indicators should be broken down by product to assess individual 
product performance. 
10. A branch replication strategy should be developed and implemented. 
11. Decentralization of the branch strategy is also required for significant growth and 
should be implemented over the next year. 
12. Technical assistance in crafting forms and procedures for internal audit department is 
one area where the MDG could be of great assistance. 
13. A complete paper audit of the loan disbursement, collection, and monitoring process is 
warranted to see where bottlenecks and redundancies exist. 
14. Savings intermediation is a serious step which should be considered only after MED￾Net has proven itself capable of handling commercial loans, 
15. At this point commercial loans are not recommended until MED-Net reaches financial 
self sufficiency and increases its overall efficiency as is reflected in a lower operating 
cost ratio of25-30%. 
4. Impact Evaluation 
A survey to assess the impact of microenterprise and health was developed and applied at three 
points in time: between October 1996 and January, 1997, when a baseline of the population was 
taken; a midterm assessment conducted between November 1998 and January 1999; and a final 
evaluation in January 2001. Random samples of the population were used at each point in time. 
Matching Grant Final Evaluation Page 9