Coherent product and funding strategies to avoid interest repricing mismatches
What is it?
The MFI’s product management for credit and savings products are consistent with and aligned to its funding strategy to maximize to the extent possible that the underlying contracts reprice at the same time.
Why is it important?
Such strategies are important tools to help an MFI to manage its interest-rate risk. This topic should be included on the agenda of the MFI’s Asset/Liability Management Committee or similar committee and discussed on a regular basis. Such strategies act as mechanisms to ensure that an MFI is not unnecessarily exposing themselves to interest-rate risk. These strategies must be in line with the risk appetite of the institution.
Key things to watch out for
- Does the MFI have an Asset/Liability Management Committee or similar forum to address coherent product and funding strategies?
- How often does it meet?
- Do the relevant managers participate in the meeting?
How to calculate
Not applicable.
Benchmarking
Not applicable.
Resources
- Liquidity Management, A Toolkit for MFIs. Available at www.gtz.de
- Asset-Liability Management for Deposit-Taking Microfinance Institutions. Available at www.cgap.org
- Toolkit for Developing a Financial Risk Management Policy. Available at www.womensworldbanking.org
Evaluation
T2.A5-2NDT.RMG