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Review of Previous Years
MicroStart: A Review of 2002
MicroStart: A Review of 2001
MicroStart: A Review of 2000
MicroStart: A Review of 1999
MicroStart: A Review of 1998
MicroStart: A Review of 2002
UNCDF/SUM has partnered with UNDP to support MicroStart programmes in 19 countries, 6 of which are LDCs. Collectively, at the end of 2002, the 73 MFIs that have received assistance have increased by over a quarter million, 252,948, the number of active clients they serve, growing from a baseline of 102,979 to 380,069 active clients during the period of assistance from MicroStart. As seventy-nine percent (79%) of these clients are women, and with an average loan size of 14% of GDP per capita, there is a strong indication that these clients are poor.
Given that impact assessment studies http://www.mip.org/ have demonstrated that clients length of time in an MFI's programme makes a difference, this underlines the importance of building sustainable microfinance institutions in order to sustain impact. Significant gains have been achieved in sustainability of these MFIs. It is generally accepted that it takes an MFI three to five years to reach operational self-sufficiency. At the end of 2002, the length of time MicroStart country programmes have been operational averages only two and a half years. It is very encouraging that, already, 42 participating MFIs (58%) have achieved operational self-sufficiency, while 59 MFIs (82%) have demonstrated clear progress. In addition, repayment performance has been reasonable: 38 MFIs (53%) have a portfolio at risk at 30 days (PAR @ 30 days) of less than 5 percent; 65% are under 7.5 percent; and 79% have a PAR @ 30 days under 10 percent.
From these investments, UNCDF/SUM's is seeing an increasing number of 'breakthrough' MFIs. A breakthrough is defined as an organization that becomes a major service provider in its geographic area, attaining substantial independence from donors through financial viability and influencing other providers.
In Morocco, Zakoura went from serving 2,000 clients to serving 36,830 clients while achieving financial self-sufficiency during the period of MicroStart assistance. A year later, Zakoura has grown to more than 80,000 active clients, with plans to continue doubling its outreach each year, for the next few years. As 96% of Zakoura's clients are women, with an average loan size of $138 or 4% of GDP per capita, there is a strong indication that its clients are poor.
In Mongolia, XAC went from startup [zero clients] to serving 5,466 clients while also achieving financial self-sufficiency during the period of MicroStart assistance. As 73% of these clients are women, with an average loan size of $291 or 17% of GDP per capita, there is a strong indication that its clients are poor. XAC, having already registered as Mongolia's first private finance company, has now transformed into a bank. XAC Bank currently serves 14,024 active clients.
In Nigeria, LAPO has achieved 15,460 active borrowers. As 100% of these clients are women, with an average loan size of $114 or 13% of GDP per capita, there is a strong indication that its clients are poor. In 2002, LAPO applied for and was awarded a grant from USAID's internationally competitive Implementation Grants Programme (IGP) after a MicroRate review. http://www.microrate.com Other potential breakthroughs include JDPC and DEC, who, at the end of 2002, have 4,495 and 5,819 active clients, respectively. In early 2003, the local advisory board approved a second phase to assist participating MFIs to scale-up to reach 100,000 active clients by end 2005.
More recently, in Kenya, through support from MicroSave and MicroStart, Equity Building Society has increased from 9,033 to 35,076 active borrowers in just two years, while increasing the number of active savers by 84,981. See "Understanding the Re-birth of Equity Building Society in Kenya." http://www.microsave-africa.com/
Other breakthroughs are emerging. In Guatemala, Banrural has increased its active microfinance clients from 22,469 to 34,261 in just 15 months, and BanCafe from zero to 10,754 in just one year. Through a joint investment with CGAP, Kashf Foundation in Pakistan has added 21,097 active clients in 15 months.
MicroStart: A Review of 2001
SUM's 2001
plan called for MicroStart to:
- Continue
implementation of the MicroStart Action Plan: present proposals
for funding to at least four donors in the first quarter of
2001, prepare selection criteria and implementation modalities
in the first quarter of 2001, and finalize by June 2001;
- Expansion
of the global MicroStart Programme, leveraging on the indications
of interest received by donors by mid-2001 and ensure funding
in place;
- Complete
report for Donors' on Results achieved by MicroStart.
Review:
Continued implementation of the Action Plan:
- SUM staff continued to ensure that the key recommendations from Action Plan to follow-up the mid-term evaluation were integrated into each ongoing programme, and that new programmes were focused on promising MFIs from the beginning. SUM used the monitoring and reporting system to prepare analyses for all MicroStart country programmes during 2001.
- Having
retooled MicroStart based on the mid-term evaluation's recommendations,
resource mobilization and expansion was a top priority in 2001:
In April, SUM worked with UNDP Africa to sign an MOU with the African Development Bank - AMINA programme to set up an operational linkage in the area of microfinance (Co-financing of the MicroStart project and UNCDF). In addition, proposals for a sum total of US$ 8 million were submitted to selected donors that have supported SUM/UNCDF microfinance in the past, or expressed interest in microfinance. A co-investor in MicroStart Philippines has requested a proposal for a Phase II for US$ 1 million focused on top-performing MFIs, to be implemented in 2002. Contacts were established with European NGOs that extend grants or loans to MFIs to establish their priority countries and the potential for investing in SUM's top-performing MFIs that need access to additional funding.
Expansion of the Global MicroStart Programme:
The target of expanding to two new countries in 2001 was met with the signature of a project document for US$ 9,621,950 with Mexico, and the approval of an investment in Pakistan.
Resources
were assigned on a competitive basis, with a focus on countries
with significant potential. SUM refined the criteria to rate countries:
- The
market criteria: SUM analyzes whether or not MicroStart
could make a difference, i.e. whether the programme could make
a contribution to initiating or expanding microfinance efforts
in a given country or region.
- Country
Office commitment:
Adequate, technically qualified and stable staff committed to
support the microfinance initiative; Best Practices commitment;
commitment of own Country Office funds, evidence of support
through senior staff, willingness to sign a partnership with
SUM.
Complete report for Donors' on results achieved by MicroStart:
- A report to Donors on Results (ROAR) was completed in March. In addition to the formal circulation, results were forwarded via email to key colleagues, posted on UNCDF's website, and updated throughout the year.
Microstart: A Review of 2000
SUM's 2000
plan called for MicroStart to:
- Develop
and implement an Action Plan based on a critical review of the
evaluation recommendations.
- Interpret
and disseminate policy focus on "break- through" organizations.
- Improve
monitoring and the use of information to make decisions
- Expand
to New Countries
Review
Action
Plan: The recommendations of the Mid-Term Evaluation were
incorporated in the 2000 SUM Business Plan, and all SUM Staff
began implementing the key recommendations immediately. To reenergize
follow-up, an Action Plan highlighting key recommendations and
summarizing the entire evaluation was completed in August [pdf
file].
Policy
Focus on Breakthroughs: SUM has worked to ensure the focus
is incorporated at all levels:
- Ensuring
that all parties share the vision of selecting and investing
in promising MFIs has been effected in all countries approving
MFIs since the mid-term evaluation (Ghana, Kenya, Nigeria).
In addition, all documents and presentations have been redrafted
to reflect this focus;
- The relationships
between Technical Service Providers (TSPs) and participating
MFIs have been restructured via a revised Micro-Capital Grant
agreement (January 2000) so that the mentor/student relationship
is not distorted by funding decisions;
- MicroStart
Advisory Boards have been reoriented via new training materials
to facilitate the winnowing process for under-performers, while
building incentives to reward top performers;
- Additional
resources have been mobilized from donor (Finland for Mongolia),
government (Morocco) and commercial sources (Mongolia, in progress)
so that lack of funds is not the constraining factor in the
growth of break-through MFIs. However, continued work will be
required in 2001 to ensure that some funds are available in
advance for rapid disbursal and not mobilized on an ad hoc basis.
- The operational
components (formulation; programme documents; TSP contracts;
MFI grant proposals; reporting) have all been retooled to ensure
that they support the sharper focus.
- The TSP
meeting scheduled for September 2000 to develop important concepts
for selecting and supporting breakthroughs (Refer to capacity
building component) was rescheduled to April/May 2001 due to
lack of funds.
Monitoring and Use of Reporting to Make Decisions
A clear system of responsibilities for SUM to monitor and prepare analysis of outreach, performance and financial reporting was completed in May 2000. Starting in May, SUM staff prepared analyses for Bahrain, Cote d'Ivoire, Egypt, Madagascar and the Philippines.
Expanding to New Countries
The focus
of MicroStart for 2000 was primarily on consolidation and improving
quality. No new funding for expansion to new countries was mobilized
in 2000. Four countries that had been selected for UNF funding
(Mozambique, Guatemala, Eastern Caribbean, Nigeria), were finalizing
TSP contracting or became operational. The appraisal for Pakistan
was still being reviewed, and an appraisal was scheduled for Mexico
in early 2001.
These countries would fully utilize the $3 million the UN Foundation made available to SUM for expansion of MicroStart. Two countries (Cuba, Ethiopia) were to develop alternative microfinance programmes, Ethiopia with SUM assistance and technical backstopping.
Challenges
for 2001
- Searching
for breakthroughs
- Establishing
quality partnerships with Country Offices
- Expanding
to two new countries in 2001
- Raising
$5 million for a co-venture fund if additional expansion is
to take place in 2001
Microstart: A Review of 1999
Given the opportunities and constraints identified at the end of 1998, MicroStart's focus for the year 1999 was be to initiate programmes in countries that have a reasonable prospect for achieving a quality programme. MicroStart's experience has been that factors that contribute to a reasonable prospect for success include an unsatisfied market for microfinance with a particular country or region, a high level of interest in and commitment to microfinance by the UNDP Country Office, the availability of funding for the initial programme, and good prospects for future financial support for successful microfinance programmes.
SUM's plan for 1999 called for MicroStart to:
- Focus on
initiating programmes in countries that had a reasonable prospect
for achieving a quality programme according to established criteria;
- Provide
technical assistance and/or micro capital grants to improve
the quality and outreach of microfinance operations of 75 local
organizations;
- Develop
contacts with the prospective Country Office focal points and
resident representatives to ascertain the likelihood of a country
office starting a programme;
- Invite
Country Offices that are potential partners to the Bangladesh
training in February 1999;
- Communicate
policy changes of the MicroStart programme with respect to lifting
of restrictions and being more responsive to the local context;
- Initiate
a matching fund if the UNF and Finnish government proposals
are successful. More specific criteria will be developed during
the first quarter of 1999;
- Promote a consortia approach to providing technical assistance in Latin America.
Review
During the 1999 planning process, SUM recognized that the original target of 25 countries would not be met by 1999. The focus instead was on initiating quality operations. As of December, 1999 20 MicroStart programmes were operational (16) or in the pipeline (4) with funding sources identified. Sixty-nine local organizations have begun to receive technical assistance and/or micro-capital grants under operational programmes:
- In Africa,
10 MicroStart countries were operational or in the pipeline:
five additional MicroStart programmes became operational bringing
the total number to 8 (Nigeria, Cote d'Ivoire, Benin, Togo,
Ghana, Zimbabwe, Madagascar, and Kenya). A total of 24 local
institutions are receiving MicroStart technical assistance and
support. Two MicroStart programmes were in the pipeline (Ethiopia
and Mozambique). Assistance is provided to 24 local organizations.
- In Asia,
3 MicroStart countries were operational (Mongolia, the Philippines
and China). Assistance was provided to 28 local organizations.
The possibility of developing a programme in Iran was to be
analyzed in 2000. The Pacific Islands programme had been reclassified
as a country receiving technical services.
- In Europe,
1 MicroStart country, the Krygyz Republic, was in the pipeline,
and one country programme in Croatia was closed.
- In Latin
America and the Caribbean, 2 MicroStart programme were operational
(Haiti), or in the pipeline (Eastern Caribbean). Three countries
(Cuba, Guatemala and Mexico) were to be analyzed in 2000. Assistance
was provided to 4 local organizations.
- In the Arab States, 4 MicroStart programmes were operational in Morocco, Egypt, Bahrain and Yemen, providing assistance to 13 local organizations.
Results
Overall, the activities designed to free constraints during 1999 were implemented and successful.
The Mid-Term Evaluation carried out in late 1999 concluded that "MicroStart is a successful microfinance strategy for UNDP. The focus on young organizations in new countries fills a niche that other donors have neglected. Some of the major donors who promote microfinance have chosen to support institutions who already have a proven track record and established client base. Other donors prefer to fully fund and provide technical assistance to an institution they fund from scratch. There is virtually no significant or systematic support for institutions that are "home grown" or young and/or small. This is particularly true in countries new to microfinance."
In terms of policy impact, the mid-term evaluation of MicroStart noted "The advisory boards have had significant impact on the legal framework regulating MFIs. MicroStart has been a learning laboratory for the regulators of microfinance, a first chance to become involved deeply with the practical issues. Key officials have had ample chance to see how organizations actually operate and debate best practice concepts such as interest rates and financial viability. " In Mongolia, MicroStart assisted the Central Bank in legislation on non bank financial institutions that opened up the entirely new sector of micro finance.
Challenges for 2000
As the two biggest constraints to future programme development, SUM identified funding and the ability of SUM to engage country offices in a meaningful dialogue on microfinance. Many Country Offices had been operating under the premise that they need a full $1.5 million to buy the programme. While this may have been true initially, more flexibility was incorporated into the MicroStart Country Programmes. As a result of experience over 1998 and 1999, MicroStart Country Programme became more responsive to demand by the country offices, the prospects for funding, and the state of the microfinance community in a particular country. Programmes in Latin America face the additional constraint that few TSPs have regional experience.
MicroStart: A Review of 1998
In 1998, the MicroStart programme called for 15 countries operational by July 1998, and 25 countries to be operational by December 1998.
As of December 31, 1998, the status was as follows: Seven (7) countries were fully operational with a TSP that had begun work in country. The country programmes included Bahrain, Cote d'Ivoire, Croatia, Madagascar, Mongolia, Morocco, and the Philippines. The Technical Service Providers were the Alexandria Business Association (ABA), SOCODEVI, CRS, Freedom From Hunger, ACDI/VOCA, Save the Children, and ASA, respectively. Five countries were on the brink of becoming operational early 1999: Ghana and Kenya with contract signature by the UNDP Country Offices pending, and Benin, Togo and Yemen in anticipation of the Technical Service Provider's arrival in country. One country, Haiti, was on the fast track, due to funding available from the Dutch government and is scheduled to become operational by the early 1999. Three country programmes - Zimbabwe, Pacific Islands and Croatia - were problematic due to funding constraints, market constraints and political issues in country. These countries were considered unlikely to develop further unless specific interventions are made to unblock constraints.
Thereupon, MicroStart projected to close the year 1999 with seven operational country programmes; another six country programmes with the high probability of becoming operational in January 1999; and, a likelihood that three country programmes may be further delayed in start-up or may have to close. As of 31 December 1998, 16 local organizations (MFIs) have been assisted through the MicroStart Programme.
Challenges
MicroStart Programme fell short of meeting the operational targets for 1998 by reason of the following constrains:
- First,
the overall planning was ambitious.
- Second,
SUM was developing operating systems at the same time it began
new programming efforts.
- Third,
a shift in resource availability was noted from the time MicroStart
was initiated in 1997 to 1998 when Country Offices found budgets
restricted for new activities. Many country programmes were
stymied due to lack of funding, or delayed while country offices
and SUM engaged in resource mobilization efforts.
- Fourth,
SUM experienced turn-over of key staff.
- Fifth,
communication with country offices has been extremely positive,
especially with those offices that see the important contribution
microfinance can make to achieve their development objectives.
In several countries, however, a misunderstanding about microfinance
has impeded efforts for quick start-up of activities.
- Sixth, based on experience this year, the MicroStart product needs to be more flexible in its application in many contexts if it will continue to evolve as a demand driven product.
While the principles of microfinance best practice will not be compromised, operational issues that have surfaced will require stretching the envelope as a new cadre of local organizations express interest in buying MicroStart services and expertise.
A major MicroStart programme's accomplishment in the year of 1998 was the establishment of MicroStart systems and procedures that became fully operational. The assessment and appraisal system and the local advisory board training systems became fully operational. The monitoring and reporting system was established but not yet electronically functional. In implementing these activities, SUM has learned a great deal about how to mount a global operation through a decentralized network.
