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Does It Make Sense for UNDP to Help Launch Small and New Organizations?

Written by: United Nations Capital Development Fund

Article Overview: The most fundamental question that this evaluation addresses is the validity of UNDP's decision to build a program focused on supporting small MFIs.

Does It Make Sense for UNDP to Help Launch Small and New Organizations?

The most fundamental question that this evaluation addresses is the validity of UNDP's decision to build a program focused on supporting small MFIs. In its 1999 Business Plan, SUM stated:

SUM made a strategic choice to provide support to start-up and fledgling institutions, including those institutions that aim to develop new products and services. The choice is based on the rationale that meeting the demand for microfinance will require new and young organizations with vision, commitment and capacity to develop sustainable microfinance operations.

This and other statements reveal that MicroStart was created to address the immense gap between the potential demand for microfinance services and the actual supply, particularly among the poorer segments of the market, with an emphasis on women. Its designers believed that in many or most countries existing mature microfinance institutions could not fill this gap and that new organizations were needed. Thus, the sights for the program were set in relation to the demand gap. MicroStart documents emphasized from the first that the organizations should become sustainable and should have the capacity for significant scaling up. The language of venture capital that SUM often used suggested that MicroStart wished to create major successes -- a core idea, which we will refer to as breakthroughs.

Defining a Breakthrough: An organization that becomes a major service provider in its geographic area, attaining substantial independence from donors through financial viability and influencing other providers.

On review of the characteristics and early performance of the organizations selected into MicroStart, we can begin to draw conclusions about the validity of SUM's main hypothesis. We conclude that it does make sense to support the kinds of organizations MicroStart hopes to reach. However, to do so, MicroStart programs in the field must substantially reorient their selection processes to focus on organizations that clearly display the characteristics SUM has already identified: vision, commitment and capacity to develop sustainable microfinance operations. This will mean a significantly smaller number of MicroStart participants, but far more productive use of UNDP resources and greater impact for the program overall.


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

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  What keeps MicroStart from selecting more high-performing organizations?
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  Overall Conclusions and Main Messages - MicroStart: Finding and Feeding Breakthroughs
  II. How Can MicroFinance Succeed In Africa?

Article Tags: business plan, charac, conclusions, core idea, donors, financial viability, fundamental question, gap, hypothesis, immense gap, mfis, microfinance institutions, microstart, rationale, segments, selection processes, successes, undp, validity, venture capital



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