Spotlight on the interview with Sylvie Lemmet, Chairman of the Finance, Risks and Impact Committee, Jérôme Brunel, Chairman of the Compliance and Internal Control Committee, and Bernard Lepot, Chairman of the Investment Committee.
Looking back on the outbreak of the crisis, could you tell us how you perceived it at the time?
Bernard Lepot: We all understood as early as March that we were in unknown territory for an indefinite period of time, with systemic consequences that were difficult to grasp. All continents were affected, including Africa and Asia, where we have most of our activities. The risk of serious difficulties for our partners was likely, with possible large provisions for the Foundation. Despite this lack of visibility, the Board had to define the Foundation’s position quickly, which we summarise as follows: support for our existing partners and consultation with other international lenders.
Sylvie Lemmet: Last March, we were completely in the dark. We felt that the crisis was going to hit developing countries hard and that we were going to face potential bankruptcies and losses for the Foundation. We were worried for our partners.
Jérôme Brunel: I feared that the impact of the pandemic, which I thought would affect developing or less developed emerging countries more strongly (though this has not been confirmed) would weaken the solidity of the Foundation’s counterparties, leading to a substantial amount of provisions. This has not materialised up to now thanks to the resilience of the organisations supported and the coordination and joint actions of the various stakeholders in the inclusive finance sector.
What has been the role of the Committee you chair in this context?
JB: The Compliance and Internal Control Committee has played its role by adapting the internal control system to the increase in Covid-19 risks, organising training on debt restructuring methods, adapting the provisioning policy and collecting more information on the end clients of our counterparties. But to be honest, it was the Finance, Risks and Impact Committee that had the primary role in mobilising the Foundation’s governance to deal with the consequences of the pandemic.
SL: The Finance, Risks and Impact (FRI) Committee already includes the Chair of the Compliance and Internal Control Committee among its members. Last year, we immediately felt the need to make the link with the Investment Committee, and its Chair also sat on the FRI Committee. The development of governance with this ad hoc committee has been extremely positive. It enabled us to build together, and with the Foundation’s Management Committee, a good understanding of the overall situation (the impact on the portfolio, liquidity and margin) and an intervention doctrine, which we developed as the crisis progressed. The objective is to provide the necessary oxygen to our partners while monitoring the risk of default.
BL: Once the roadmap was established, the Investment Committee continued to meet every month, but by videoconferencing, with a reduced number of new projects of course, but with close monitoring of the maturity extensions granted to microfinance institutions that requested them and, more generally, enhanced risk monitoring. The Board also decided to set up an ad hoc committee consisting of the three chairmen of the specialized committees to examine and discuss possible adjustments to the Foundation’s strategy. This body met several times to exchange views with the teams and to provide input to the Board before decisions were made.
What lessons have you learned from this experience one year later, and what prospects do you see for the Foundation in 2021?
SL: One year on, I am above all reassured by the quality of the men and women who make up the Foundation’s executive team and who have been able to respond to an unprecedented situation with great flexibility, professionalism and commitment. We were able to control the financial risks without abandoning our partners in difficulty, and to test the resilience of the organisations we supported, which reassures us as to their quality and as well as the resistance of the microfinance sector to shocks. This is a point that needs to be explored in order to gain a better understanding of the mechanisms that have been implemented locally and the real social impact behind the good financial performance. We all hope for a return to a less chaotic situation and the resumption of activities in 2021. We will have to learn the lessons of remote instructions and juggle with an activity that seems to be picking up though travel remains limited. The pandemic is not yet behind us, but I hope it will remain under control in the countries in which we operate.
JB: The health crisis has shown, first, the solidity of the commitments undertaken by the Foundation, i.e. the judicious choice of its counterparts. Secondly, the quality of the response of the team and its Managing Director to adapt to this unprecedented context, helped by the mobilisation of its Board and its specialised committees. Finally, the Foundation’s commitment to continue its lending activity despite this «hostile» environment and to support microfinance institutions through an international initiative to harmonise the policies of other lenders and a precise dialogue with each of the borrowers.
BL: One year on, it is worth underscoring the remarkable mobilisation and adaptation of the Foundation’s teams, with great collaboration between the various functions. We should also note the great resilience of our portfolio to date, which has perhaps exceeded our expectations. Good information/involvement on the part of the Board has enabled it to express its full support and solidarity with the Foundation’s strategy and actions. Things are still very uncertain for 2021, with perhaps a better visibility in the 4th quarter, but again nothing is certain. Let’s hope that 2021 will be a year of transition that will enable us to resume our development activities in 2022.
Download the 2020 Integrated Report here.