CIAO DATE: 7/04

Fundusz Mikro
An Experiment In Partnership–Based Microfinance 1998 – 2002

Abstract

Fundusz Mikro’s evolution has to be understood in the context of Poland’s emergence from communism during the 1990s. For businesses, the challenge of that time was not merely to learn new skills, but to unlearn old habits and attitudes while at the same time taking on new ones appropriate to a market economy. Because of this shift, Fundusz Mikro (FM) found that it had to do more than lend money; it had to learn to play a more pro–active role in changing the culture in which business took place. The financial crisis of 1998 and the harder economic times since then were an added incentive for FM to adapt its approach, products, and finally its mission.

This paper describes the seven-year learning process that resulted in Fundusz Mikro’s innovative support system for entrepreneurs. At the heart of the system is the Fundusz Mikro mission statement: Create opportunities for the development of business talents by providing access to capital on the basis of an assessment of entrepreneurs’ intentions and abilities.

The paper describes how FM has developed and adapted this mission and, consequently, its products, based on a growing understanding of Polish entrepreneurs. The essence of these findings is that a large number of Polish entrepreneurs were (and to some extent remain) quite closed and secretive about their businesses and their knowledge. For FM to do solid assessment and risk analysis, it required getting behind this barrier, hence the organization’s growing conviction that it had to develop relationships based on trust and not on sanctions.

FM’s innovative loan product (“Partnership Finance”) is the result, and is described in the last section of this paper. That section explains how the product emerged from FM’s learning and how its advantages facilitate FM’s evolving emphasis on business education and “culture change.” The paper is presented in the spirit of experience sharing and mutual learning.

Full Text (PDF, 40 pages, 1.26 MB)