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"Supporting Women's Livelihoods - Microfinance that Works for the Majority" : Table of Contents
Part VI: Role of Donors
As controllers
of financial resources, donors ultimately determine which institutions
receive grant funding, for how long, and for what purpose. Donors
influence what services are expanded and when outreach is broadened,
as well as contribute to innovation in operations and to action
research. How a donor works influences whether those services
have a permanent impact, and whether those innovations are adopted
by many institutions and mainstreamed into their operations.
Donors and Broadened Outreach
Donors have
an important role in ensuring that poor women continue to benefit
from financial services. This role is enhanced by supporting institutions
committed to:
- Achieving
and maintaining financial sustainability, and therefore permanent,
continuous services to female clients;
- Deepening
outreach to underserved women by developing products that can
attract them as customers; and
- Promoting
gender equity and gender analysis in the workplace.
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ENCOURAGING
INNOVATION TO BETTER SERVE POOR WOMEN The
Consultative Group to Assist the Poorest (CGAP) is a multi-donor
initiative with a mission to improve the capacity of MFIs
to deliver flexible, high-quality financial services on
a sustainable basis to the poor, especially the very poor.
As part of its efforts to foster industry learning from
initiatives at the field level, CGAP has initiated the Pro-Poor
Innovation Challenge. This is an awards programme seeking
to recognize innovative activities promoting a distinct
poverty focus. The programme provides grants of up to $50,000
to small MFIs demonstrating effective models for reaching
very poor clients, reducing their vulnerability and increasing
their economic well being. Past awardees have included institutions
piloting and perfecting product innovations such as insurance,
smart cards, and education interventions, as well as those
adopting innovative methodologies to reach underserved populations
like nomadic and indigenous peoples. Since women constitute
some of the most marginalized sectors of these populations,
MFIs engaged in innovative activities to ensure long-term
gender transformations both within their institutions as
well as in the communities they serve are encouraged to
apply. Source: Syed Hashemi, CGAP. |
Donors
and Innovation
Donors are
also strategically positioned to support innovation in the field.
Some practical guidelines for donors are presented below:
- Support
the innovators. The innovators in microfinance are practitioners,
not donors. Donor operations may require readjustment to reverse
the focus.
- Energize
practitioners to stretch their own boundaries. Innovation does
not happen by viewing MFIs as the implementers of donor plans,
no matter how well conceived. When MFIs initiate new products
or services based solely on the donor demands, the results tend
to be unsuccessful and can even damage the institution’s
existing operations. In addition, truly innovative and successful
microfinance institutions tend to reject this type of donor
influence, leaving the donor with partners who are either “grant-hungry”
or have unclear organizational direction, or both.
- Allow MFIs
to decide who they will reach and how. Although it may be tempting
for many donors concerned with gender to channel their resources
to services for women only, this limits the MFIs’ potential
market. Further, when such targeting conflicts with the fundamental
vision of the MFI, it is generally unsuccessful or unsustainable.
- Seek out
and support MFIs that have objectives compatible with donor
goals. Unless they are fundamentally rooted in the MFI’s
vision and essential to its operation, quotas regarding gender
(or geographical limits, poverty levels, or other market restrictions)
tend to undermine the MFI’s objectives.
- Negotiate
performance targets based on the MFI’s own business plan.
Setting performance targets is appropriate only when both parties
are fully committed to reaching those targets; i.e. when the
MFI does not see the grant as an inducement, and the donor does
not use it as one. Setting performance targets based on the
MFI’s business plan helps clarify and strengthen the MFI-donor
relationship. Donors should keep in mind that the upper level
for targets in a grant agreement should be what the donor accepts
as a minimum for the investment to be considered worthwhile,
not the ideal level represented in the business plan.
Innovation
in Operations. Grants or subsidies on a limited basis
can also be provided for institutions developing new technologies,
systems, and products, or testing markets.
Innovation in Action Research. Donors help advance
the state of industry knowledge through research, evaluation,
and publication. Donor agencies can leverage the broad perspectives
afforded by their contacts with many institutions to disseminate
lessons and best practices in the area of gender and microfinance.
This position also enables them to facilitate information sharing
with different actors in the field, helping build platforms for
lobbying and advocacy. Lastly, action research can help develop
replicable models for the sustainable delivery of gender-sensitive
products and services.
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A
UNIQUE PROJECT: MICROSAVE OF EAST AFRICA MicroSave-Africa
is a unique project that promotes the development of savings
and other more client-responsive financial services among
microfinance institutions in East Africa. To achieve this
goal, the project has successfully combined primary field-level
research with the poor, action research with MFIs, curriculum
development, and information dissemination. While the field-level
research entails extensive interviews with poor people (including
microfinance clients) to better understand their financial
behaviour and risk profile, the action research involves
helping MFIs to better listen to clients and design appropriate
financial products based on better market information. Both
research activities complement each other and directly feed
into curriculum development and dissemination efforts.
MicroSave-Africa
is supported by DfID, UNDP, and CGAP. Source: Willis Osemo, MicroSave-Africa. |
Donors
and Impact Assessments
Donors investing
in microfinance should be convinced of its effectiveness as a
poverty alleviation tool. Efforts to measure the impacts of these
interventions should be practitioner-oriented, utilizing methodologies
designed to improve the quality of the provision of these services
to poor women clients. Specifically, donors should:
- Use approaches
that help MFIs better understand their female clients’
needs, enabling them to design products and services that address
gender differences;
- Pilot low-cost
tools and methodologies focused on improving service delivery
rather than proving impact; and
- Bear the
cost of these studies or of the implementation of monitoring
systems to track this data.In conclusion, donors can play a
crucial catalytic role in encouraging, defining, and developing
MFIs. Donors can:
- Make a
difference between the success or failure of MFI programmes;
- Either
encourage innovation or hamper changes beneficial to MFIs or
to gender-sensitive delivery; and
- Provide funds for research that identifies, improves upon, and builds successful programmes.
