Recommendations

This report recommends that SUM reorient MicroStart to focus more clearly on finding and supporting organizations that have good potential to become major providers, while reducing the proportion of its resources devoted to low potential organizations.

1) Reposition MicroStart to emphasize breakthroughs. Use these concepts in interactions with country offices, boards, and TSPs.

Although SUM has talked of venture capital and promising organizations, these ideas have not always penetrated to the level of TSPs and county offices. MicroStart should emphasize throughout its training and promotional materials that it is about finding potential breakthroughs. It should generate lively discussion in its conferences and communications with country offices, advisory boards, and TSPs about how to identify breakthroughs. The new training program for advisory board members already begins to do this. SUM should air debate about hidden assumptions, such as the idea that only weak organizations can benefit from MicroStart.

2) Ensure that MicroStart as implemented at the country level does not impose pressure to select low potential organizations.

This involves removing any remaining requirements for selecting a minimum number of organizations, minimizing geographic restrictions, counseling country offices and boards to allow TSPs to make choices without interference, and ensuring that TSPs are given adequate time to get to know organizations before they are required to submit proposed agreements.

3) Develop mechanisms that turn MicroStart into a winnowing process Everyone acknowledges that it is impossible to pick winners correctly every time. There will always be organizations in MicroStart's portfolios that are not panning out. MicroStart should develop mechanisms for winnowing out the poor performers and providing more intensive support to the good performers. The reasons for doing this include: (a) more efficient use of MicroStart resources; (b) the incentive effect on participants of knowing that only the good performers will continue; and (c) the fact that even good organizations remain fragile, and may continue to need assistance either to consolidate gains or to continue to move forward. A variety of mechanisms could be considered, such as an extension of a MicroStart program into a second phase that works only with the good performers (as suggested in Morocco), or bonus grants for organizations that meet their targets (as suggested in the Philippines). In new MicroStart programs, the winnowing process could be integrated into the initial design. In countries with few MFIs, MicroStart may even wish to insert a pre-selection phase before including organizations in a full-blown MicroStart program.

MicroStart: Finding and Feeding Breakthroughs Midterm Evaluation Prepared for UNCDF/SUM 10 December 1999 Elisabeth Rhyne and Jill Donahue To learn more about this author, visit United Nations Capital Development Fund's Website.

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