Stt Gaul is the Product Development Manager for MIX, the world’s leading information provider for the microfinance industry and the developer of industry benchmarks and performance analysis of microfinance institutions. He will be making the presentation MIX: A Microfinance Use Case for XBRL at the 19th XBRL International nference in Paris. 

Imagine this scenario: an entire sector of financial institutions lending solely to low-inme individuals without requiring the nventional safeguards of llateral and proper documentation. A superheated investment climate pushes institutions to package these loans into a set of increasingly sophisticated financial instruments and sell them to investors. Many of the institutions are unregulated.

Sound like a recipe for disaster? It’s not the subprime lending market. It’s microfinance.

The parallels have not gone unnoticed. Microfinance institutions (MFIs) have made a business of working with the unbanked for decades, developing new lending and saving strategies tailored to the needs of the poor. As the sector has garnered increasing mmercial interest, microfinance practitioners have been working on initiatives designed to address and prevent the types of excess seen in the subprime sector. These initiatives focus on customer protection,ethical principles for microfinance institutions, transparency on interest rates, and improved measurement of social variables.

In large part, the microfinance sector has been able to weather the current crisis. Investment has slowed in some sectors, but global catastrophe has yet to strike.

One factor that we like to think will help microfinance institutions weather this crisis is a long-term focus on transparency. When your re business has a tendency to engender surprise or nfusion (“You lend only to poor people? Poor people can open savings acunts?”), transparency has its benefits. Open, voluntary exchange of information enables MFIs to win the trust of investors, regulators, researchers, and other MFIs.

XBRL can be a valuable tool for increasing the transparency of MFIs. Since 2002, the Microfinance Information Exchange (MIX) has operated as a global public platform for exchange of information on microfinance institutions and a central repository for this information. Our anization llects data from 1,400 MFIs for presentation on our web, Mixmarket., and inrporates the resulting information into periodic analysis and benchmarks. To better anize, llect, and present this data, over the past few years, we have looked to XBRL as a solution. While our business processes have had to evolve along with XBRL, our small size has also enabled us to adjust quickly.

We have adopted a data-driven model for data llection. Our MFI partners operate in over 100 untries under many different acunting standards and regulatory regimes. The institutions vary wildly in size, capacity, and willingness to share information. Participation is also mpletely free and voluntary.

For all of these reasons, we cannot easily create or enforce a one-size-fits-all form. Instead, our focus is on providing a framework in which our analysts can extract and model information relevant to the microfinance sector from MFI financial statements such as audits, ratings, and due diligence reports. We have developed a taxonomy based on IFRS mbined with disclosure guidelines and expertise from the microfinance sector to capture this information. By the end of the year, we hope to have captured data from over 1,000 MFIs through this taxonomy, and early results show that we can capture a much wider range of data points using this approach.

We expect that one of the main benefits of this approach will be increased financial transparency within the MFI mmunity. As the mplexity and detail within MFI financial statements increases, we will be able to capture and share information. In the long run, we hope the taxonomy can also support local regulators and international works seeking to use standardized reporting as a basis for decision-making. While there are certainly challenges ahead – XBRL has little name regnition or support within the microfinance sector, and we still have not mastered presenting or analyzing XBRL ntent in a way that would make the benefits easier to mmunicate – these are a more interesting set of problems now that we have a handle on the data.