|Sustainability of Micro-enterprise Credit Schemes in Kenya's Informal Sector (K-REP, 1993, 14 p.)|
|3. CREATING SELF-SUSTAINING MICROENTERPRISES CREDIT SCHEMES|
There are a number of steps on the road to sustainability, to which the sustainability ladder below is a broad guide.
Level IV - profitable banking operation, recovery of Headquarters, training, expansion research costs, independent of donors.
Level III - Complete Branch Sustainability. Over 100% recovery of branch costs; staff training costs covered, contribution to headquarter costs.
Level II - Financial systems Approach employed. All Prime costs and the branch overhead costs covered. Large outreach.
Level I - All prime costs covered by revenues. Low outreach. Financial Systems approach not internalized.
The institutional internalization of the financial system approach is the first stage toward sustainability. Level II leads towards an operationally effective and commercially based approach. The minimalist school is a financial systems approach (level II and above). The hardest transition is from level I to level II which involves a major restructuring of management, management systems and implementing capacity. K-REP supported minimalist programmes have all passed level I (recovering over 50% of branch costs) this is being greatly assisted by substantial investment income from loans and grants from K-REP which will diminish over time but will only be replenished if the programmes are effective in their operational management and their portfolio quality. Long term sustainability means total operational profitability and the generation of loan funds which must rely on the savings base of the programme. It is worth noting that the Grameen Bank is still subsidy dependent for expansion and training costs.