1) The desire to reach a target number of organizations in each country The original design of MicroStart called for 5 to 10 participants in each country. These numbers have proven to be too high in most countries. Especially in small countries and in countries where microfinance is relatively new, there are simply not enough promising MFIs to select. In order to comply with the mandate of the program, however, TSPs have filled out the roster with organizations they themselves judged to have low potential. Recently, MicroStart has removed this pressure, making it clear that the number of institutions to assist should be flexible. However, pressure to select a larger number still comes from UNDP country offices and especially from their government counterparts who want to be seen as responsive to as large a number of local organizations as possible. No one likes to be the one who says no to a well-meaning organization. It should go without saying that that pressure from country offices and governments is generally counterproductive, and that TSPs need to make judgments free of external pressures in favor of one or another organization.
2) The belief that weak organizations will benefit more from assistance than strong ones This is a very influential and pervasive sentiment. The following quotes (some from a UNDP country officer and some from a TSP staff member) state this argument plainly:
If the institution has strong management....there would be no use providing TA.
We needed to support weak and small organizations that, almost by definition would have weak management (otherwise, one could argue, why provide TA?).
How do we know that the strong MFIs wouldn't have attained the objectives without MicroStart support?
The impact may be greater if we are successful in influencing old and weak institutions to reorient themselves.
Reasoning similar to this nearly led to the exclusion of two of MicroStart's potential breakthroughs (Zakoura in Morocco and Bayan in the Philippines), on the grounds that they were too strong.
In fact, these points contain fallacies that have been proven wrong repeatedly in international experience of working with MFIs. Hard-won lessons about assisting MFIs suggest that:
The organizations with strong management are exactly the ones who are most likely to benefit from technical assistance. Strong organizations are hungry for knowledge about how to run their organizations better. They pick up good ideas and run with them.
Organizations with weak management often can't implement the good ideas they receive.
It is extremely difficult for an external TA provider to reorient old organizations. An organization is highly unlikely to shed its own vision and operational culture and adapt a different vision offered by an outsider.
Though organizations may use assistance to improve what they do, their ability to improve will still be limited by who they are.
These observations are borne out by the Morocco program. Evidence of MicroStart's influence abounds at Zakoura. Thus, while one would judge Zakoura as a strong organization with good management, it has made productive use of the learning available through MicroStart. On the other hand, Ismailia, with major management shortcomings, is still struggling to implement the most basic of management improvements and FONDEP, where there is a vision clash with the TSP, still resists basic concepts underlying best practice microfinance.
No one should expect a MicroStart participant to have mastered all the major aspects of operating as a successful MFI. In fact, Zakoura was far from a top-performing organization at the beginning of MicroStart (and still has a long way to go). The key is to learn to distinguish between "small and promising" and "small and weak," and the question for MicroStart is how to equip and motivate the UNDP country offices, TSPs and advisory boards to make such distinctions.
3) Geographic limitations In some countries MicroStart has been directed to work in specific geographic areas. In Madagascar, UNDP steered MicroStart to the poorer southern end of the country, while in the Philippines it emphasized rural areas and coverage of all parts of the country. The motivations behind such restrictions are often valid -- e.g. to reach poorer areas and ensure that microfinance services are available in more and more locations. In other cases the motives are less justifiable (e.g., where donors have divided a country into zones of influence). However, rigid geographical restrictions are a certain recipe for low results. If geography dominates selection criteria, organizations will be chosen which otherwise would not be attractive candidates, and which lack critical characteristics. Geographic considerations should figure as only one among a variety of selection factors, and not the dominant factor.
4) Time pressure In a number of cases the selection suffered from pressure to make selections too quickly. In Morocco, for example, the TSP had one and a half months after being notified of its selection to assess organizations, select participants and negotiate workplans. Because UNDP Morocco risked losing access to future resources (TRAC II) if it did not meet expenditure targets in 1997, it requested Save the Children to complete selection before the end of the fiscal year. The events that led to the time squeeze are understandable and often unavoidable bureaucratic processes. However, a lack of time at this stage truncates the valuable process during which a TSP gets to know the prospective participant. As we will discuss in a moment, important distinguishing factors between promising and non-promising organizations include capability of leaders, compatibility of vision and willingness to be transparent. Judgment about these factors requires more than superficial interaction.
MicroStart: Finding and Feeding Breakthroughs Midterm Evaluation Prepared for UNCDF/SUM 10 December 1999 Elisabeth Rhyne and Jill Donahue
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United Nations Capital Development Fund
(Visit United Nations's Website)
The United Nations Capital Development
Fund (UNCDF) is a UN organization mandated
by the UN General Assembly and its
Executive Board to provide capital
assistance first and foremost to the Least
Developed Countries (LDCs). UNCDF invests
in LDCs in order to support their efforts
to reduce poverty and achieve the
Millennium Development Goals, especially
in its two main product lines - Micro
finance and Local Development. UNCDF is
part of the UNDP-group and hosts the UN
Advisors Group on Inclusive Financial
Sectors.
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