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Central to financial management of a micro-finance organization is effective management of its cash flow. Too much cash in a branch or organization results in lost income, while too little cash results in missed loan opportunities, delayed bill payments or high borrowing costs (overdraft charges). It is important to forecast cash needs accurately to reduce the amount of idle funds yet have enough cash available for operations.

All staff members of a micro-finance organization play a role in forecasting cash needs and ensuring adequate liquidity at the branch level. This lesson discusses how to forecast cash requirements and how to calculate liquidity ratios, an effective cash management practice.

The lesson shows you how to manage the flow of cash in a branch including forecasting cash requirements. Topics covered include:

  • Forecasting cash flows
  • Cash shortage/idle funds
  • Liquidity ratios
reviewed & published
Ledgerwood, J.
finance - lesson 6
Mfi Management, Donors, Financial Planning