UNCDF Rated Highly by 2013 SmartAid for Microfinance Index (SmartAid)

UNCDF has scored 84 out of 100 points in the 2013 SmartAid for Microfinance Index (SmartAid).  This represents an increase over UNCDF’s SmartAid 2011 score, demonstrating our commitment to continued high achievement. UNCDF ranked high in all nine dimensions deemed necessary for the effective promotion of inclusive and sustainable financial sectors. 

The 2013 report identifies UNCDF as an institution that “has continued to work to break new ground, venturing into timely global thematic areas and developing and piloting MAP (Making Access Possible) to support national level stakeholders to meet the challenge of better evidence-based policy making.” It states that “UNCDF’s strengths and comparative advantages allow it to act as a facilitator on behalf of larger donors (such as foundations) making small grants to help catalyze markets and to offer its infrastructure to other funders who are not as well positioned to facilitate at the local market level.” 

UNCDF’s score on project identification system, performance indicators, performance-based agreements, and portfolio reviews were the highest among all SmartAid participants to date, placing UNCDF in the top two of all agencies scored by SmartAid since its inception.

“UNCDF is proud of this result,” said Marc Bichler, Executive Secretary. “The 2013 SmartAid exercise confirms that we are on the right track in our efforts to improve lives by bringing affordable, adapted and sustainable financial services to some of the world’s poorest populations. At the same time, wherever SmartAid has pointed to areas in which we can improve even further, we are committed to doing so.” 

SmartAid is built on the premise that sound management systems, policies, procedures and incentives are necessary (though not sufficient) conditions for successful programmes. The Index is inspired by the ISO standards that specify requirements for state-of-the-art products and services and for good conformity assessment, as well as for managerial and organizational practice. The Index does not evaluate the on-the-ground performance of microfinance portfolios, but rather scores agencies on a framework of five elements of effectiveness—strategic clarity, staff capacity, accountability for results, knowledge management, and appropriate instruments—that capture the requirements for quality aid management throughout the project or investment cycle.    

At the Better Aid for Access to Finance meeting in 2006, 29 development leaders representing the largest microfinance funders committed to measuring the quality of their aid management in microfinance by developing and piloting this Index and signed the Compact for Better Aid for Access to Finance, which set the cornerstone for the Smart Aid for the Microfinance Index.

CGAP developed SmartAid in partnership with its members and with advice from experts from the Center for Global Development, the OECD, and the United Nations World Institute for Development Economics Research (WIDER) University.  Five funders— AFD/Proparco, EIF, IFAD, MIF and UNCDF —participated in SmartAid 2013, increasing the total number of funders participating in the SmartAid Index to 19. Prior rounds have included the participation of AECID, AFD, AfDB, AsDB, CIDA, EC, EIB, FMO, GIZ, IFC, ILO, KfW, SDC, and Sida. Three agencies from the 2013 round participated in prior SmartAid rounds (IFAD, MIF and UNCDF).

Among UNCDF’s strengths, the 2013 review highlights its “solid base of good practice, whose oversight and execution lie with seasoned and competent professionals. Many of its strengths are reference points for peer institutions: its flagging system, the use of MIX GOLD Premium for tracking performance, and its flexible use of grants.”

UNCDF’s strategy, which focuses on its role to provide catalytic capital and to add value, was found solid as it is providing clear guidelines for staff. 

The assessment also points out some areas for improvement, including the need for UNCDF to balance growth of global thematic programs with country-level operation.  The report suggests to improve knowledge generation and dissemination from the global thematic initiatives. “Global thematic programs represent an untapped opportunity to strengthen UNCDF’s work further. Knowledge exchange and transfer of lessons learned from these programs enhance UNCDF’s country level operations, and could potentially serve this function at the global level for any stakeholder.”

While the review confirms that UNCDF has shown positive trends in the direction of strengthening internal quality assurance and learning from internal reviews, the report reminds that as UNCDF’s programming has become more complex, quality assurance functions need to be continually monitored to prevent deterioration. Growth presents new opportunities and new challenges. And UNCDF needs to continue to align the quality assurance and learning functions with the growth of the organization.