Credit Agreement C4086-NG Conformed

These disclosure guidelines were developed in consultation with microfinance practitioners, and the member donors of CGAP (the Consultative Group to Assist the Poor). CGAP recommends to its donor members that they condition their grants, soft loans, or guarantees on a recipient's full compliance with these guidelines, within one year from the start of funding. These guidelines should be relevant to a broad range of institutions. However, the sponsors do not recommend mandatory compliance with the guidelines on the part of all microfinance institutions (MFIs). Rather, they recommend that donors require compliance by MFIs that meet the criteria as set below. At a minimum, it is recommended that the annual financial reports of an MFI, including audited reports, comply with these guidelines, although much of the information specified here should also appear in reports documenting shorter periods. It is emphasized that these are disclosure guidelines only. They call for the reporting of certain information, including the accounting method used in deriving information, but they do not direct the choice of accounting method. The text following each guideline rule includes a brief explanation on why the required information is important. More detailed discussions can be found in manuals for financial analysis of MFIs. The disclosure guidelines do not include all relevant financial disclosure item; IFRS require, and many MFIs provide, disclosure of other financial information, beyond the requirements of these guidelines. Decisions as to which information to include in the guidelines were based on a desire to produce a minimum set of disclosure items that would meet two tests: 1) Is the information essential for understanding the core condition of an MFI and its potential to move beyond reliance on scarce subsidized funding? And, 2) In present practice, is the information frequently missing from MFI financial statements? Annual external audits of the financial statements of MFIs are strongly recommended, and are usually required by funders. Yet even if financial statements are not audited, these disclosure guidelines are intended to apply, especially when financial statements are used to present an MFI's financial condition to outsiders, such as donors or investors.