Microcredit management support: the United Nations has spent the last year promoting the importance of microcredit worldwide. CMA Agneta Eikelenboom has been involved in making it work on the ground.

Microcredit is an important form of financial aid in developing countries. It provides small loans to those usually excluded from formal financial services. Currently, microentrepreneurs use loans as small as $100 to grow thriving businesses and, in turn, provide for their families, which helps local economies flourish.

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In fact, the importance, and general effectiveness, of the microcredit process led the United Nations to name 2005 the year of microcredit. The purpose of this was to build inclusive financial sectors and strengthen the powerful, but often untapped, entrepreneurial spirit existing in communities around the world.

The overarching goal is to provide greater access to credit, savings, insurance, transfer remittances and other financial services for poor and low-income households so that they can look forward to a more secure livelihood and a prosperous future.

"Let us be clear: microfinance is not charity," noted Kofi Annan, the UN's Secretary General at the time of the announcement of the initiative. "It is a way to extend the same rights and services to low-income households that are available to everyone else. It is recognition that poor people are the solution, not the problem. It is a way to build on their ideas, energy, and vision. It is a way to grow productive enterprises, and so allow communities to prosper."

The effective management of microcredit programs in underprivileged communities obviously comes with their own unique challenges. This is yet another area in which strong management accounting skills have proven beneficial.

Agneta Eikelenboom, CMA, made a unique contribution to a Bolivian microcredit organization when, a few years ago, she took on an assignment for CUSO in Bolivia. CUSO is a Canadian-based international development organization with programs in Africa, the Asia Pacific region, and the Americas and Caribbean. It works with partner groups and individuals "seeking to foster equality and freedom, safeguard cultures and communities, and protect the environment." Supporting local business development, of course, falls under this broad umbrella of concerns.

"My work for CUSO's partner organization in Bolivia, FONCRESOL (Fondo de Credito Solidario, or Solidarity Credit Fund) involved assisting the financial administration team of this not-for-profit organization to better prepare for external audits and to improve internal control mechanisms," Eikelenboom explains.

FONCRESOL's objective is to improve the quality of life for people in the poorest sectors of the population, increase their development capacities, and facilitate financial support to make production initiatives viable. It administers approximately $2 million in funds, which benefits approximately 6,000 clients in seven provinces.

In September 2002, when Eikelenboom first began working with the organization, it was having tremendous difficulties with financial reporting. The availability of international funding for operating expenses had become a concern, so the organization set out to restructure its accounting system.

"I proposed an alternative method of linking the portfolio management system and the accounting system," notes Eikelenboom. "The lack of integration between these two functions was the primary cause of the problems under review."

In April 2003, Eikelenboom was appointed interim director of finance, in charge of implementing the proposed system and training staff in the La Paz and Potosi offices of the organization, and preparing for the all-important external audits for the 2002 and 2003 fiscal years.

"The biggest challenges of my assignment were overcoming resistance to change within the organization, achieving an integrated finance team with optimal communication among staff, and negotiating with the diligent external auditors," says Eikelenboom.

Her efforts paid off, however. In June 2004, the efforts of her and her staff were rewarded with clean external audit reports for 2002 and 2003, and renewed backing from a German financing organization.

FONCRESOL was also given a long-term portfolio administration contract for a World Food Programme fund to benefit small dairy producers in three provinces of Bolivia.

"During the last year of my posting, we focused on a three-year strategic plan, preparing proposals for funding, and meeting the financial reporting requirements of FINRURAL, a Bolivian association of microfinance organizations working for rural development," Eikelenboom says.

FINRURAL submits monthly financial reports on the combined portfolios of its members to the Bolivian superintendents of banks, a government agency. Among other services it supplies its members are workshops on various microfinance topics and access to a national database of delinquent loans.

FONCRESOL has since achieved its third consecutive favourable external audit opinion, and reduced audit costs by 40% compared to the 2001 and 2002 external audits.

Before the end of her contract, Eikelenboom transferred her responsibilities as finance director to a Bolivian professional accountant, fulfilling CUSO's capacity building objective.

"I am still in touch with my former colleagues, and continue to mentor two young graduates of accounting programs at Bolivian universities," she notes.

Robert Colman is editor-in-chief of CMA Management.