CREATION OF SUSTAINABLE MICROFINANCE INSTITUTIONS The core competence and key activity of FIDES is the greenfield creation of sustainable microfinance institutions in rural areas. When targeting rural areas, adjustments to local conditions are necessarily stronger than in urban contexts, requiring innovative approaches that are based on international best practices for microfinance and at the same time take into account a wide range of specific environments.
Over the last ten years, FIDES has been involved in the creation of microfinance institutions in Eastern Europe and in Africa ranging from classical microfinance banks to Savings and Loans Associations Networks and Islamic financial institutions. None of these institutions failed.

As a general rule, FIDES develops the concept of the institution and confirms its feasibility through a pilot testing phase which verifies its hypotheses on markets, products, clients and organizational settings. In a subsequent stage joint investment is sought, often with institutional and private investors, in order to allow institution building and the expansion of activities on a larger scale.

All the programs developed with FIDES participation have the following common characteristics:

• Repayment rate close to 100%
• Strong client outreach capacity
• Financial sustainability as a main objective after an initial growth
• Clear governance structure
• Strong links with the commercial banking sector
• Reliable institution-building strategy, based on an appropriate legal framework

TRAINING FIDES considers that human resources development is the key issue for a further expansion of microfinance institutions. It has organized a large number of training seminars and sessions in partner countries and provides significant support to building local training capacity. FIDES is the technical input provider for the Master of Science in Microfinance, a one-year postgraduate training program organized by the University of Montpellier, France.

EXPERTISE On the micro-level, FIDES carries out feasibility studies and/or evaluations for donor agencies and investors, develops strategies for microfinance institutions, and supports the introduction of technical and organizational innovations. On meso- and macro-level, FIDES has provided expertise for the development and implementation of countrywide sectorial strategies and has been involved in the designing of conducive legal and regulatory frameworks for microfinance, especially in Eastern Europe and Africa.

RESEARCH is a core component of FIDES activity, and its purpose is to enable FIDES to innovate in its institution-building programs. Strong partnerships with universities and research centres have been developed.

An important research program implemented by FIDES and funded by the Swiss Government involves leading microfinance institutions from Asia, Eastern Europe and Africa. Its objective is the development of new financial products and the creation of in-house research capacities in microfinance institutions. The program has now expanded to micro-insurance.

Another main line of the research program is Social Performance Monitoring. FIDES and its partners aim to fight poverty and reach the rural poor through sustainable microfinance institutions. To pursue and effectively monitor this "double-bottom line," the Research and Development Unit created a social performance monitoring system for clients in both Namibia and Mali. The social performance monitoring system complements the financial and portfolio data providing key information on clients, their households, their enterprises and level of rurality on a quarterly and annual basis.

The social performance monitoring system allows FIDES' microfinance institutions to compare client poverty levels with national statistics which is useful for benchmarking with other microfinance institutions. The system also creates client segmentation in four categories: highly vulnerable; moderately vulnerable; low vulnerability; relatively stable. This segmentation tool is useful for market research, product development and client profiling. The basis of the system is a 5-7 minute interview, called a poverty score-card, with clients conducted entirely by the field staff.

One of the main challenges that rural microfinance will face in the next years will be the development of technical and organizational innovations in order to lower transaction cost when expanding financial services to poorer people. This involves further development of our IT-technology, including management information systems, software for service points, GSM-banking facilities, smart card systems for clients, and facilities for illiterate clients (e.g. touch-screen systems). It also involves further research on client demand and financial product development in the fields of loans, savings and micro-insurance.