Tweet

Can MicroStart Have a Significant Impact on Policy and the Environment for Microfinance?

Written by: United Nations Capital Development Fund

Article Overview: MicroStart programs establish an action-oriented framework for bringing key players together to learn about microfinance development. These players include government policy makers, private sector actors (potential social entrepreneurs or financiers), MFIs, and other donors.

Can MicroStart Have a Significant Impact on Policy and the Environment for Microfinance?

MicroStart programs establish an action-oriented framework for bringing key players together to learn about microfinance development. These players include government policy makers, private sector actors (potential social entrepreneurs or financiers), MFIs, and other donors. By creating this interaction, MicroStart has the potential for significant influence on the thinking of policy makers and other leaders. This potential was clearly demonstrated in Morocco, and to some extent Ivory Coast. At times, the effort of bringing all the players together causes frustrations and delays. However, the effort is worthwhile because bringing all these pieces together is what makes MicroStart especially effective in influencing the environment for microfinance.

A. Advisory Boards and Government Policy Makers

The evaluation showed that MicroStart has a significant impact in the two countries visited where microfinance is new. In Morocco and Ivory Coast the advisory boards include people who, by virtue of their positions in the government, the private sector and the donor community, are in a position to influence the evolution of the microfinance industry. The concentration of opinion leaders in one committee has allowed them to combine and concentrate efforts that have added up to more than each individual could have accomplished alone. MicroStart has also:

Enabled wide access to and efficient dissemination of accurate information on microfinance
Organized discussions and debates in a forum that has a purpose and a decision-making role specific to microfinance
Brought influential leaders together in one cohesive entity
The advisory boards take their responsibilities towards MicroStart seriously. They consider carefully which MFIs are performing, which are not and what to do about it. They listen closely to and learn from the TSP’s knowledge and experience. The success of the advisory board relates directly to how it is constituted. It is crucial that the right people are on the board, particularly the key people charged with overseeing microfinance within government, some people with a strong business orientation, and some who are microfinance experts. The board training that SUM conducts at the launching of MicroStart in some countries appears to have a positive effect on the quality and performance of the advisory board.

In addition, the UNDP government-executing agency is involved in MicroStart. In Ivory Coast and Morocco, the combined involvement of the executing agency and the leaders on the advisory board has had significant impact on the legal framework regulating MFIs. In Morocco, the government had already begun the process of developing a law on microcredit when MicroStart began, and the basic elements of the law had been sketched out. But MicroStart has been a learning laboratory for the regulators of microfinance, a first chance to become involved deeply with the practical issues. Through MicroStart, key officials have had ample chance to see how organizations actually operate and debate best practice concepts such as interest rates and financial viability. The Ministry of Finance representative who sits on the advisory board is responsible for regulating specialized financial institutions. He and his office now understand the need for cost-recovery interest rates, and although it must bow to the Islamic disapproval of high rates, his office will leave the door open for organizations to charge additional fees.


In Ivory Coast, the government-executing agency chosen by UNDP for MicroStart, IMEC, is responsible for overseeing application of the PARMEC law which governs MFIs. The IMEC representative is a member of the advisory board and he has convinced the board that all MFIs participating in MicroStart must be either registered under PARMEC or in the process of doing so.

In Mongolia, the TSP and the newly-created MFI, XAC, have worked with the Central Bank to develop an appropriate institutional framework for a microfinance institution and regulations on the supervision of and accounting standards for non-bank financial institutions.

In the Philippines, on the other hand, MicroStart is one of many microfinance programs and its advisory board one of too many committees. In this setting, MicroStart is not likely to have much policy influence. this suggests that MicroStart will have more influence in countries where microfinance is still a fairly new phenomenon.

In fact, MicroStart has a unique role in countries new to microfinance, because of the way that it organizes the players around the introduction of best practices. In countries with established microfinance sectors, MicroStart should enter only when it can identify a specific value added from its presence, for example, as in Zimbabwe where it is bringing in new kinds of organizations.

B. MicroStart and Government Funding Apexes

In the Philippines, Egypt and Zimbabwe, the government executing agency provides wholesale loans to MFIs to capitalize their lending operations. In essence, they are funding apexes. In such cases, loans—not grants— are given to MicroStart participants. In Zimbabwe and Egypt MicroStart is dealing with standard social funds developed to mitigate the effects of structural adjustment. Such funds typically have a large pool of resources, but they have a history of supporting microfinance as a charity or providing loans directly themselves, in classic bad-practice fashion. In Egypt, for example, loans are structured in a way that precludes the MFI from operating sustainably. MicroStart is helping these funds develop more appropriate ways of working with microfinance. In the Philippines, the apex already has a large portfolio of loans to MFIs which are based on reasonably sound selection criteria and policies. However, the procedures of the facility are very cumbersome, and they cause problems for the MFIs participating in MicroStart.

The practices followed by such government apexes leave much to be desired. Procedures are complicated and the process takes too long and is frustrating to the MFIs. MicroStart, however, puts UNDP and opinion leaders involved with microfinance in a position to influence government agencies to adopt better practices. MicroStart should not become a promoter of government apexes as a general strategy. However, in cases where such apexes exist, and where government has directed those apexes to take the lead in microfinance, it makes sense for MicroStart to work with apexes, in part to engage in dialogue about improving apex operations.

But what are those better practices? And who knows about them? In order to wield its potential influence effectively, UNDP—perhaps through its MicroStart advisory board—needs to develop expertise in the area of sound practices of a government-funding apex. Furthermore, a strategy is needed on how the expertise will be gained, and how to persuade governments to adopt better practices.

C. Influence on Donor Policy

MicroStart's mechanism of talking through funding proposals with advisory boards is an improvement over the standard donor model of just funding a single organization -- because it means lessons from the experiences are learned widely. With a MicroStart program in place, it will be more difficult for a donor to fund bad-practice, because the funding process is somewhat more open. The one-on-one model, on the other hand, keeps the lessons inside. MicroStart should be an attractive mechanism for other donors to support for that reason. This goes for UNDP offices as well. MicroStart operates side by side in some countries with egregious examples of bad practice in UNDP portfolios, such as having UNVs make loans directly. SUM should consider whether it can use MicroStart to raise questions about such practices.

D. Recommendations

MicroStart should continue the advisory committee process, particularly with the new training program. We have only a few recommendations to improve the policy impact of MicroStart:

Focus on countries new to microfinance. In other countries, search for value added
Add best practices for government apex funders to SUM's learning agenda.
Strengthen efforts to influence UNDP policy (see below)

MicroStart: Finding and Feeding Breakthroughs
Midterm Evaluation
Prepared for UNCDF/SUM
10 December 1999
Elisabeth Rhyne and Jill Donahue

Related Articles
  Does It Make Sense for UNDP to Help Launch Small and New Organizations?
  Introduction - MicroStart: Finding and Feeding Breakthroughs
  Can Technical Service Providers Add Significant Value?
  Overall Conclusions and Main Messages - MicroStart: Finding and Feeding Breakthroughs
  MFI Performance in Countries Visited: A Few Numbers

Article Tags: advisory boards, debates, dissemination, donor community, donors, financiers, frustrations, government policy makers, influential leaders, ivory coast, mfis, microfinance industry, microstart, oriented framework, private sector actors, significant impact, significant influence, social entrepreneurs, tsp, virtue



Related Forum Posts
Social IMPACT!! Marketing - How it will change your Business - SEO,SEM and more recently SMO have been the catch phrase for those wishing to optimize their sites for the search engines and all will see you gain some level of success, but I am about to introduce you to a new catch phrase SIM or Social Impact Marketing, a system that has been developed at Kooiii tested on Kooiii and proven to be more effective than any of the other 3 systems in use. When we started Kooiii 6 or so weeks ago we were building a site that had nothing as far as SEO,SEM or SMO properties it was lost way back in the depths of most search engines and had an Alexa rating of 3.8 million, it was lucky to get 12 visitors a week and that was mostly my business partner and myself with the odd visitor that somehow found their way to the site by mistake. Our original idea was to build Kooiii as a Search Platform that was capable of spidering some of the most popular social networks, however we realized early on that those coming to Kooiii would also want some form of social interaction with our site if it was going to go anywhere so we implemented a simple to use Micro-Blogging system as the front end of the system we were putting together. Not having money to promote our new baby we had to resort to using all the free avenues we could find in order to attract people to the site, of course this meant utilizing as many of the social networks we belonged to as possible, Not being spammers and not wishing to appear as such we decided that we would simply keep active on the social networks while sharing and posting to our profiles from kooiii, it was at this point we realized we were onto something suddenly within a week we saw our Alexa drop dramatically and our membership start to grow not only on Kooiii but also on the social sites we belonged to, people seemed to be drawn to us like we were magnets and Kooiii went from 4 members (all admins) to over 1500 members quickly. By teaching those that joined Kooiii to also share member posts on the social networks, not only those we were posting but other members posts as well we saw the birth of a completely new way to promote something, see everyone saw the same effects we were seeing not only was Kooiii skyrocketing up Alexa but the members sites and popularity were also soaring and so Social Impact Marketing came into the world of the Internet. So lets re-cap SIM it's a system where members of Kooiii cross promote each others offers using a socially connected Micro-Blogging system creating tremendous buzz about the offers throughout the wider social scene in other words causing Social Impact using Marketing techniques resulting in massive targeted traffic generation to a specific site or page for basically no monitory outlay.
Re: How to finance your independent movie - Hi, The video doesn't come up with its own URL... But it's the very bottom video on the page. Here's the description of it: Financing, Production and Social Impact of Feature Films Host- Carol Atwood - Founder, Spartacus Media Enterprises Panelists: Bill Johnson - Co-Founder and Partner, Inferno Distribution Steven Haft - Producer, Media Consultant Michael Goorjian - Actor, Producer, Writer
Re: How to be green? - Hi Evan It’s a great topic especially when it comes to going green and saving our planet. We all have a role to play and we are happy about the fact that we are into it. We have recently made our workplace greener and in the process the following changes have been implemented – 1. We provide paper invoices only if customers ask for them. Otherwise, all our invoicing is done electronically (a PDF via e-mail). 2. We have replaced the Paper Cups at our Cafeteria with Mugs for not only our in-house requirements but also for our clients. 3. We have also made it a Company policy to use only eco-friendly electronic appliances and that includes bulbs, air conditioners. 4. We are in the process of putting it into the Policy that the Employees will have to take to other transportation media – other than their personal vehicles – on at least a day per week to office. Hope we are on the right track. Regards,
Different Types of Funding - Finance for business can be obtained through a number of different sources. Let's review some of those channels to help you decide what's right for your business needs: Grants There are over 930 different EU and UK grants and loans available from over 100 issuing bodies. This is the cheapest form of finance and an important part of the funding package that companies and individuals need. We can help you find your way through this maze. Technology Micro Projects: 50% of eligible costs up to £20,000 Research project: For a technical and feasibility study of an innovative idea for new technology 60% of costs up to a grant of £75,000. Development project: For development up to pre production 35% of costs up to a grant of £200,000 Developing an innovative idea: valuable for small companies and individuals at the start of a technical project: 75% of costs of hiring a mentor and consultants. Export To start exporting or moving into new markets grants of 50% of costs up to £20,000 each. Training and Education Knowledge Transfer Partnerships, Achieving Best Practice in Your Business, Investors in People Modern Apprenticeships New Deal for various grants. Environment BOC Foundation for the Environment: 25% to 50% of Project cost, typically £20,000 to £100,000 Clean up Fund: Emission reducing equipment up to 75% of cost Community Chest Fund: Up to £25,000 for projects near active SITA sites High Impact Fund: £150,000+ for larger projects near SITA sites Assisted Areas Regional assistance grants of between 10 and 35% for capital expenditure in less favoured areas of the UK. Loans Loans are an excellent source of finance if you have suitable security to borrow against or a reliable earnings stream. This needs to be planned and presented well to obtain funds. Credit cards Provides up to 56 days free credit if you play the game! Overdraft Banks are surprisingly supportive when presented with a well thought through plan and competent management. Bank Loans Lenders tend to look for a good business plan and security. Typically the loan is approved by a centralised back office function rather than the person you meet. Terms and rates depend upon the risk. Repayments can be very flexible to meet your specific needs. Mortgages These can include flexible repayment terms to meet your business needs. This can even be incorporated into your overdraft finance so that you have one flexible account for both personal/ business mortgages and overdraft Small Firms Loan Guarantee Scheme Up to two years trading: Up to £100,000 Over two years trading: Up to £250,000 However these are difficult to obtain and are a loan of last resort. Export Guarantee Scheme This is government backed insurance against appropriate export documentation. Mezzanine This is a halfway house between loan and equity. It can be an innovative way of raising funds for the more established business. Mostly for expansion capital. Equity This is not as easy as the papers would have you know. Only 1% of business plans received by Venture Capital Funds are successful. However, a good business proposition consisting of a strong demand for the product or service, management track record and a sound financial plan will enhance the chance of success. Business Angels These are high net worth individuals who are successful businessmen looking for investment opportunities. They can provide both time expertise and money. Typical investment size is £25,000 to £250,000 but can go as high as £2m for the right opportunity. Exit within 3-5 years. Venture Capital These are investment funds seeking high rates of return. However typically investments are over a million pounds. Some funds are targeted at lower amounts depending upon the sector and region. These funds are looking for exponential capital growth over 3-5 years. Asset backed finance This can cover machinery, sales invoices even sales orders. It can be a very flexible source of finance to the growing business Leasing This will cover your capital expenditure and spread the cost over a three to five year period. It is particularly useful if you do not have taxable profits to maximise your capital allowances. Sale and leaseback of a property you own is another good source of funds. Factoring Factoring offers a sales ledger administration and debt collection service. Up to 95% of an approved sales invoice is paid within 48 hours, quicker if required. Credit protection is also available to protect against a bad debt. The Factor will own and place a first charge over the book debts and they might also take other charges, depending upon the strength of the financial information. Invoice discounting Invoice Discounting can be Confidential or Disclosed; it depends upon the strength of the financial information. The service is the same as Factoring, except that the sales ledger administration and the debt collection is the responsibility of the client and not the Factor. Pre payment of the approved sales invoice is still up to 95% and the factor will still have a first charge on the book debt and therefore own the debt. This service can also have credit protection cover. All sales invoices need to be for a business to business debt, and some proof of delivery is generally required. Trade Finance This is funding provided against stock purchases, signed contracts and orders whereby the funder will prepay a certain percentage of the value Pension fund It may be possible to use your pension funds for a loan back to the business What do u think about it?
Re: Social Networking and You - Thank you Mal The Fact is that these predictions are already being proven true so much so that my partners and i have developed a new system we call Social Impact Marketing , and using this system we have been able to get some amazing results dropping a sites Alexa from 3.8 million right down to 153,752 in just over 7 weeks and increasing it's page views from 52 per week to between 60,000 and 112,000+ per day and unique visitors up from 12 (mostly ourselves) per week to around 600 to 1000 unique visits per day, to prove it's not a fluke we then went on to do the same for 2 other sites. of course basic SEO was still used but the main effect could be traced to SIM, which is a simple system to implement but requires the use of a team comprising of at least 3 - 4 people working in unison. Just how far we are able to push a site using SIM is yet to be established as the sites used in our testing of the system continue to improve daily and until they peak we cannot establish a benchmark however they have already passed the achievable levels using the basic SEO applied to them..


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Why We MUST Reinvent The Wheel

Common Sense Stress Management

Resistance to Change and How to Deal With It

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.