use of best practice methodologies in microfinance operations, donors can be very instrumental in providing policy guidance and technical assistance not only in conceptualizing but also in the actual setting up of tiered and graduated regulatory structures within which mi -rofinance can reach the unserved and underserved economic sectors.

# **Information,** disclosure and reporting requirements and standards

93. One of the foundations for a viable prudential regulatory framework is the collection, organization and provision of operating and financial information on a timely basis, under a well-organized and orderly reporting system. The comprehensive and integrated risk management partnership among the key players requires the provision and sharing of information among several of the key players. The information on operations and financial results of an organization is generated periodically for the use of management and the organization's supervisory board. The informatiorn to be shared with outside third parties will depend on the requirements of external auditors, donors, regulators and outside stakeholders such as depositors, clients and credit-rating agencies. However, few MFIs are legally required to disclose their financial condition with the rigor demanded of licensed banks, which makes meaningful comparisons of MFI financial statements rather difficult.

94. If they are operating prudently, NGO MFIs which are not subject to any form of regulation or supervision by government regulatory agencies will maintain information systems, records and reports for their own internal use. These will include the quality of the loan portfolio, the organization's status as regards operating and full financial self-sufficiency, the management of liquidity, liabilities and capital funds. To some extent, these important pieces of information are available and can be provided to donors and other stakeholders without any undue burdens on the MFI.

95. The question of what specific minimum standards of perfonnance are relevant to or should be required of MFIs in different non-regulated and regulated categories -- whether by donors, government regulators, stakeholders or independent credit rating agencies -- is a more difficult issue. The difficulty arises from the need to recognize differences in country settings and accepted social and commercial practices and conventions, but also because of the variety of microfinance institutions and their client base. The global experience in capital markets development has demonstrated the ability of independent, private sector-organized credit rating agencies to establish credible market-based performance standards, and may provide insights into how standards for microfinance institutions might be developed.

96. The Microfinance Program of the Economics Institute in Boulder, Colorado and CGAP are involved in a project to develop a database on the financial performance of MFIIs, to help MFI managers improve their understanding of the performance of their own individual institultoens through comparison with data from similar MFIs in their peer group. This is similar to the use by managers of commercial banks and other businesses of peer group analysis as a valuable management tool. Confidential reports to participating MFIs on their individual financial performance in the conte,;t of an appropriate peer group are the main product of the project. The secondary output is a semi-annual _MicroBanking Bulletin_ which provides a broader audience with statistical financial data on participating MiIFls as a whole as well as on peer groups of such MFIs.

97. The World Bank can provide assistance through staff training and dissemination by seminars, workshops and publications, to increase the awareness and use of best practice methodologies in microfinance operations. Building strong institutional management and financial performance should be the focus of technical assistance and a prerequisite for obtaining access to World Bank loans. As a specific example, the World Bank has elaborated policies relevant for len.dig to financial intermediaries, 33