list of agencies participating in the peer ......microfinance donor peer reviews, conducted from may...

Acknowledgements: The authors would like to express their gratitude to the 29 donor staff from 21 agencies who served as peer reviewers and/or organizers for this exercise. We would also like to thank the eight CGAP colleagues and partners who participated in reviews and field visits. They all enthusiastically embarked on these challenging yet collegial reviews, and acti-vely contributed to the drafting of the individual letters to management. This paper is largely based on E. Duflos, B. Helms, A. Latortue and H. Siedek, Global Results: Analysis and Lessons; Aid Effectiveness Initiative: Microfinance Donor Peer Reviews (Paris: CGAP, 2004). Any errors or omissions remain the responsibility of the authors.

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Seventeen development agencies participated in the Microfinance Donor Peer Reviews as part of an aid effectiveness initiative to improve donor practice.

MICROFINANCE DONOR PEER REVIEWS

Authors:Brigit HelmsAlexia Latortue

Elements of Donor Effectiveness in Microfinance: Policy Implications

LIST OF AGENCIES PARTICIPATING IN THE PEER REVIEW EXERCISE

Donor Agency Date Donor Reviewers CGAP Reviewers

Bilateral Agencies

Agence Française de Développement (AFD)

10-14 March 2003

Camilla Bengtsson, SidaRoland Siller, KfW

Brigit HelmsEric Duflos

Canadian International Development Agency (CIDA)

9-13 June 2003

Ross Croulet, AfDBKate McKee, USAID

Jennifer IsernEric Duflos

DANIDA 28 April-1 May 2003

Doris Wong, CIDAKathy von Daeniken, SDC

Xavier ReilleEric Duflos

Department for International Development (DFID)

13-17 May 2002

Kate McKee, USAIDLeila Webster, World Bank Group

Brigit HelmsAlexia Latortue

Gesellschaft für Technische Zusammenarbeit (GTZ)

14-18 July2003

Nimal Fernando, AsDBCraig Churchill, ILO

Alexia LatortueEric Duflos

Kreditanstalt für Wiederaufbau (KfW)

14-18 Oct 2002

Anne Clerc, AFDDavid Ferrand, DFID

Syed HashemiAlexia Latortue

Netherlands 19-23 May 2003

Bernd Balkenhol, ILOMavis Owusu-Gyamfi, DFIDSanjay Sinha, EDA Rural Systems


Norwegian Agency forDevelopment Cooperation(NORAD)

4-7 June2002

Gabriela Braun, GTZStav Zotalis, AusAID


Swedish InternationalDevelopment Agency (Sida)

20-24 May 2002

Richard Roberts, FAODavid Stanton, DFID


Swiss Agency for Developmentand Cooperation (SDC)

18-22 Aug2003

Dirk Steinwand, GTZJohan de Waard, Netherlands


US Agency for InternationalDevelopment (USAID)

10-18 Nov2003

Richard Boulter, DFIDHenri Dommel, IFAD


Multilateral Agencies

African Development Bank(AfDB)

6-10 May2002

Camilla Bengtsson, SidaStephan Boven, EBRD

Elizabeth LittlefieldAlexia Latortue

Asian Development Bank(AsDB)

8-12 July 2002

Henri Dommel, IFADDavid Stanton, DFID


European Commission (EC) 24-28 March 2003

Henri Dommel, IFADGisela Strand, Sida


International Fund for AgriculturalDevelopment (IFAD)

17-21 June2002

Heather Clark, UNCDF/UNDPHege Gulli, NORAD

Douglas PearceAlexia Latortue

International Labor Organization(ILO)

10-14 Feb2003

Hege Gulli, NORADPeter Kooi, UNCDF/UNDP


UN Development Programme andUN Capital Development Fund(UNDP and UNCDF)

21-25 Oct2002

Nimal Fernando, AsDBArlina Tarigan-Sibero, KfW


Policy Implications and High-Level Commitment

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LIST OF AGENCIES PARTICIPATING IN THE PEER REVIEW EXERCISE

Donor Agency Date Donor Reviewers CGAP Reviewers

Bilateral Agencies

Agence Française de Développement (AFD)

10-14 March 2003Camilla Bengtsson, Sida Roland Siller, KfW


Canadian International Development Agency (CIDA)

9-13 June 2003Ross Croulet, AfDBKate McKee, USAID

Jennifer IsernEric Duflos

DANIDA 28 April-1 May 2003Doris Wong, CIDAKathy van Daeniken, SDC

Xavier ReilleEric Duflos

Department for International Development (DFID)

13-17 May 2002Kate McKee, USAIDLeila Webster, World Bank Group


Gesellschaft für Technische Zusammenarbeit (GTZ)

14-18 July 2003Nimal Fernando, AsDBCraig Churchill, ILO

Alexia LatortueEric Duflos

Kreditanstalt für Wiederaufbau (KfW)

14-18 Oct 2002Anne Clerc, AFDDavid Ferrand, DFID


Netherlands 19-23 May 2003Bernd Balkenhol, ILOMavis Owusu-Gyamfi, DFIDSanjay Sinha, EDA Rural Systems


Norwegian Agency for Development Cooperation(NORAD)

4-7 June 2002Gabriela Braun, GTZStav Zotalis, AusAID


Swedish International Development Agency (Sida)

20-24 May 2002Richard Roberts, FAODavid Stanton, DFID


Swiss Development Corporation (SDC)

18-22 Aug 2003Dirk Steinwand, GTZJohan de Waard, Netherlands


US Agency for International Development (USAID)

10-18 Nov 2003Richard Boulter, DFIDHenri Dommel, IFAD


Multilateral Agencies

African Development Bank (AfDB)

6-10 May 2002Camilla Bengtsson, SidaStephan Boven, EBRD

Elizabeth LittlefieldAlexia Latortue

Asian Development Bank (AsDB)

8-12 July 2002Henri Dommel, IFADDavid Stanton, DFID


European Commission (EC) 24-28 March 2003Henri Dommel, IFADGisela Strand, Sida


International Fund for Agricultural Development (IFAD)

17-21 June 2002Heather Clark, UNCDF/UNDPHege Gulli, NORAD

Douglas PearceAlexia Latortue

International Labor Organization (ILO)

10-14 Feb 2003Hege Gulli, NORADPeter Kooi, UNCDF/UNDP


UN Development Programme and UN Capital Development Fund (UNDP and UNCDF)

21-25 Oct 2002Nimal Fernando, AsDBArlina Tarigan-Sibero, KfW


ACKNOWLEDGMENTS

The authors would like to express their gratitude to the 29 donor staff from 21 agencies who served as peer reviewers and/or organizers for this exercise. We would also like to thank the eight CGAP colleagues andpartners who participated in reviews and field visits. They all enthusiastically embarked on these challenging yet collegial reviews, and actively contributed to the drafting of the individual letters to management.

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ELEMENTS OF DONOR EFFECTIVENESS IN MICROFINANCE: POLICY IMPLICATIONS

April 2004

What makes a donor agency effective in supporting financial systems that work for poor people? The Microfinance Donor Peer Reviews, conducted from May 2002 to November 2003, offered some concrete answers to this question.

The Peer Reviews examined the modus operandi of 17 bilateral and multilateral agencies, yielding five core elements of donor effectiveness: 1) strategic clarity and coherence, 2) strong staff capacity, 3) accountability for results, 4) relevant knowledge management, and 5) appropriate instruments. While not exhaustive, these elements shape an individual agency’s ability to apply good practice to its microfinance operations—thus achieving greater impact in the lives of poor people. A minimum level of performance in each of the five elements is critical for donor effectiveness in microfinance and, in all probability, other areas of development as well.

This paper explains the five core elements of effectiveness and gives examples of good practice for each. It also illustrates how the elements help determine an agency’s comparative advantage and appropriate niche in microfinance vis-à-vis others. Finally, the note suggests ways that donors can forge partnerships with those that have complementary strengths, thus making the donor community as a whole more effective.

FIVE CORE ELEMENTS OF DONOR EFFECTIVENESS

Strategic Clarity The coherence of an agency’s vision of microfinance, especially the relationship between microfinance operations and broader development goals, affects quality at every level. Agencies with strategic clarity know where they want to go and align their behavior and operations to that vision. A coherent approach (rather than a splintered one) does not stifle diversity and creativity, but rather defines the boundaries of a common commitment to principles of good practice. A high-quality microfinance policy is important, but not sufficient; policies must be internalized by staff to translate into results on the ground.

Donor agencies and microfinance leaders increasingly embrace a common vision of microfinance. This vision embeds financial systems for the poor within private or financial sector development—while appreciating the cross-cutting impact of microfinance on other areas like social sectors and rural development. This approach to microfinance will ensure permanent access to a broad range of financial services for the world’s poor on a massive scale, through viable local institutions that endure beyond the life of a given donor project. Agencies with strategic clarity tend to view microfinance along these lines. This vision differs from the more

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traditional and narrow perception of financial services, mainly credit, as an input or resource transfer to specific target populations.

Examples of agencies with strong strategic clarity include DFID, GTZ, KfW, and SDC. All have a coherent vision of microfinance as part of financial sector development. This coherence is evidenced by one or more of the following: strong policies that adhere to international standards; principles of good practice clearly understood and internalized by headquarter and field staff; and the appropriate placement of microfinance specialists within financial sector development units or departments. Other agencies moving quickly toward reaching greater clarity on their vision for microfinance include USAID, AFD, and NORAD.

Strong Staff Capacity

The Peer Reviews confirmed a direct link between staff with solid microfinance technical expertise and the quality of an agency’s microfinance operations. Within donor agencies, most microfinance programs are managed by non-microfinance specialist staff, functionally splitting those with technical expertise on the one hand, and those with control over money on the other.

The four most effective agencies overall among those that were reviewed—DFID, GTZ, KfW and USAID—have strong technical focal points (individuals or teams of technical specialists, usually concentrated in a single unit). Beyond the focal point, staff have a solid basic knowledge of microfinance principles, even if they work in this area only a small proportion of their time.

Several other agencies, notably some of the multilateral organizations with large microfinance portfolios, also have strong focal points. These include AsDB, IFAD, ILO, and UNDP. However, even a high-quality focal point cannot assure quality in agencies with a large volume of programs. This challenge is particularly acute in agencies where microfinance originates from many different departments, and/or from decentralized country offices.

Focal points that prioritize spreading good practices among non-specialist colleagues at headquarters and in the field tend to be more effective than those who spend most of their time managing their own projects. But incentives in two directions are needed to encourage this interaction. The focal point must have an incentive to engage non-microfinance specialists, and program managers must see the benefits of seeking technical advice from microfinance experts. KfW technical specialists are motivated to support colleagues throughout the organization because this function is embedded in their TORs and work plans, and team leaders from other regions comment on their annual performance evaluations.

When employing full-time specialist staff is not financially or politically feasible, agencies can adopt creative ways to access technical expertise, through outsourcing or strategic alliances. However, there is no substitute for in-house staff capacity. At a minimum, non-microfinance specialist staff who handle microfinance projects should have a baseline of knowledge. They need to know what questions to ask and when, how to select technical partners and consultants, and how to interpret reports from microfinance projects. Tailored training for non-microfinance specialist staff such as that offered by USAID and UNDP can help improve overall staff capacity.

Accountability for Results

Transparency about performance of microfinance programs is critical for aid effectiveness. Only with accurate information can agencies make sound decisions on whether to continue, extend, terminate or replicate a program. Yet, the Peer Reviews found that most of the agencies that were reviewed do not know how much money they have invested in microfinance, nor do they have sufficient knowledge of the performance of their microfinance operations. In many agencies, especially the multilaterals, pressure to approve and disburse projects exacerbates the problem; the imperative to get projects approved often takes precedence over setting up systems to ensure accountability.

USAID most systematically collects basic information on its portfolio via the Microenterprise Results Reporting (MRR) system. A number of other agencies conduct periodic inventories of

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projects, such as AFD, AsDB, CIDA, EC, IFAD, and Sida. UNDP is completing a major portfolio review to determine the quality of its projects and design a course of action to improve performance.

Some agencies have chosen to leverage existing international tools to improve their accountability for results. IFAD and the Dutch Microfinance Platform have recently decided to use the Microfinance Information eXchange (MIX Market), an internet-based reporting tool for microfinance institutions and funders, for project reporting. In Uganda, 15 donor agencies (including AfDB, DFID, EC, NORAD and USAID) have developed a single Performance Monitoring Tool (PMT) that their Ugandan partners can use for all donor reporting.

Relevant Knowledge Management

Knowledge management—the creation, dissemination and utilization of knowledge—is about transforming information into usable knowledge and ensuring that it reaches the right people at the right time. When knowledge management enables agencies to learn from their own and others’ experience, it greatly contributes to effectiveness. By emphasizing knowledge management as a personal and joint staff objective, GTZ succeeded in creating a culture of intellectual exchange and shared responsibility.

Several agencies have very strong research programs and provide valuable public goods to the global microfinance community. These agencies include USAID, AsDB, and DFID. Though it is an important component of knowledge management, research does not always translate into improved practices on the ground, real exchange among staff, or institutional learning. Also, most agencies are either highly decentralized or moving rapidly in that direction. Knowledge management is particularly challenging in these environments, where country-level officials often have a fair amount of autonomy in setting strategy and making funding decisions.

Internal knowledge networks (such as the Financial Services Team and the Savings and Credit Forum at SDC, the Rural Finance Thematic Group at IFAD, the Rural and Microfinance Committee at AsDB, regional sector networks at GTZ, and the Sub-thematic Group on Microfinance at the EC) enable staff to exchange, disseminate and retain knowledge within their organization.

Appropriate Instruments

A wide range of funding instruments is required to support microfinance well. These instruments include grants, loans, loan guarantees and equity participation, and are used to build institutional capacity, provide technical assistance, fund lines of credit, facilitate the access of financial institutions to local capital, bolster equity, launch policy initiatives and build financial infrastructure (such as credit rating agencies and auditors). All instruments should be used flexibly, with disbursements linked to the attainment of clear performance goals.

Overall trends in donor agencies emphasize new aid modalities, a “program” approach (as opposed to a “project” approach), direct government budget support and Sector-wide Approaches linked to Poverty Reduction Strategies, and policy dialogue. These trends pose certain trade-offs for expanding financial services for the poor. Good microfinance operations are usually incompatible with large budgets and direct government intervention. Effective instruments accommodate small projects focused primarily on strengthening private sector institutions.

A number of agencies have appropriate instruments to support microfinance, notably bilateral agencies like AFD, KfW, USAID, and the Netherlands through the Dutch Microfinance Platform. They can work directly with the private sector using a relatively wide range of flexible instruments. Other agencies with strong instruments include DANIDA, DFID, SDC, and Sida. This group of agencies can also work easily with the private sector, but either do not have as wide a range of instruments and/or do not yet fully exploit the range instruments that they do have.

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While many agencies work through governments, multilateral development banks face specific challenges. Their main instrument is loans to governments. They are also more likely to implement credit components within larger multi-sector projects. Experience has shown that governments should not be directly involved in the delivery of financial services or the management of microfinance initiatives. Government ministries and project management units usually lack the technical skills and political independence needed to manage microfinance projects. Also, governments are often understandably reluctant to take loans for small technical assistance projects, even though such assistance is vital to support permanent access to financial services for the poor.

Many agencies have recognized that credit components (also known as credit lines, revolving funds, and community development funds) do not produce the intended results. Following the EC Peer Review, the agency’s top management decided to cease funding new credit lines that distort markets and have limited impact on poor people. Other agencies are approving fewer credit components as well.

IMPLICATIONS: IDENTIFYING AND ACTING ON COMPARATIVE ADVANTAGE

Building financial systems that work for the poor – the majority of the world’s population – is a daunting task. Today, demand far exceeds supply for financial services, and market failures continue to block poor people’s access. Continued donor support of the sector remains vital. The range of required donor engagements encompass working with diverse types of financial intermediaries (e.g., banks, cooperatives, postal systems), entering into policy dialogue with governments and other stakeholders, and helping to build industry infrastructure. At the same time, not every agency can or should work on all these different levels.

Donors can use the five core elements of effectiveness as one input to identify their comparative advantage in promoting financial services for the poor. Combined with other agency-specific considerations, these elements can help guide donor actions in a given country context and/or type of intervention. For example, decentralized decision-making and technical expertise are important success factors for microfinance operations that require constant dialogue and technical support, especially policy work. Similarly, a long track record in a particular country or region can be critical for credibility and give an agency a local comparative advantage.

The Peer Reviews highlighted potential opportunities for several agencies to align their operations with their comparative advantage, for example:

n GTZ’s strengths include a cadre of in-house technical specialists, a sophisticated knowledge management strategy, efficient regional microfinance staff networks, and a long history of involvement in microfinance. These strengths make it an ideal organization to pursue highly specialized technical work to support financial intermediaries in areas like rural finance and savings mobilization. GTZ can also effectively provide hands-on support to those who implement key government policies, e.g., bank supervisors.

n NORAD is a small bilateral donor with grant funds and limited technical staff, especially at the embassy level. Its Microfinance Position Paper outlines a strategy that leverages its grants by focusing on relatively high risk innovations and industry infrastructure programs and working through Norwegian NGOs. The agency plans to only fund individual MFIs in close cooperation with other donors.

n Both KfW and AFD have diverse banking instruments that allow them to work with a range of financial institutions – primarily loans, loan guarantees, and equity participation. However, they have limited grant funding available for technical assistance, and financial disincentives to launch small capacity-building projects. These agencies could fruitfully partner with others that have flexible grant funding to broaden the range of support they can offer to partners.

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n The ILO’s tripartite governance structure (which includes governments, workers, and industry) could offer the organization a comparative advantage in constituency-based work, such as supporting workers’ banks, providing social protection through microinsurance, and generating employment through small enterprise development.

Analysis of comparative advantage can guide agencies to determine their optimal level of involvement in microfinance. Some possible action scenarios include:

Expand: The agency makes microfinance a strategic priority. It invests significantly in developing an agency-wide vision and strategy, technical staff capacity, and systems for accountability and knowledge management.

Consolidate: The agency decides to retain the same volume of microfinance spending and specialize in particular niche markets (geographical or technical) where it has a comparative advantage. The concentration of its portfolio yields greater impact for the same amount of funding.

Delegate: The agency decides that it has a limited comparative advantage, but wishes to remain involved in microfinance. It forges co-funding or other types of agreements where the design, implementation, monitoring and evaluation of microfinance projects are delegated to an agency with a clear comparative advantage in pro-poor financial sector work.

Phase out: Based on its limited or non-existent comparative advantage, the agency decides to stop developing new microfinance operations and winds down its existing portfolio. Resources previously used for microfinance are reassigned to other development sectors where the agency can be more effective.

As donor agencies identify and act on their comparative advantage, they can also build on one another’s strengths to form operational alliances. Collaboration makes possible the consistent application of good practice standards, a greater range of funding instruments and partners, and reduced transactions costs—enabling donors to attain far more impact together than any single donor could achieve alone.

Options for this kind of collaboration range along a wide spectrum. At one end, individual donors can agree on a common strategy for working in a particular country. Each agency can then engage with specific financial system stakeholders based on its own strengths. At the other end of the spectrum, donors can pool resources and conduct joint programming with harmonized procedures and one voice. Many other collaborative approaches lie in between. Regardless of the model chosen, preliminary experience suggests that the key to success of true collaboration is a clearly articulated vision that is shared by all donors involved.

An example of good collaborative practice is the multi-donor Pro-poor Financial Sector Deepening Program (FSD Program) in Tanzania, where four donors pooled funds to support the expansion of financial services to poor people. The FSD program, led by DFID and including CIDA, Sida and the Royal Netherlands Embassy, is built on a common vision, harmonization of procedures, and a professionally-managed trust mechanism to implement capacity-building projects, mainly with financial intermediaries.

The Southeastern European Funds represent another example of this kind of collaboration. In recognition of its comparative advantage in technical expertise, experience with banking instruments, and knowledge of financial intermediaries in the region, KfW manages these funds on behalf of multiple donors, including the EC, BMZ, SDC, the Austrian government, and Netherlands Development Finance Company (FMO).

Note: This paper is largely based on E. Duflos, B. Helms, A. Latortue, and H. Siedek, “Global Results: Analysis and Lessons,” Aid Effectiveness Initiative, Microfinance Donor Peer Reviews (Paris: CGAP, 2004). Any errors or omissions remain the responsibility of the authors.

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JOINT MEMORANDUM

High Level Meeting

Leveraging Our Comparative Advantage to Improve Aid Effectiveness February 2004, Paris

We, the 17 development assistance agencies participating in the Microfinance Donor Peer Reviews, affirm our continued commitment to improving aid effectiveness overall, and specifically in micro-finance.1 We would like to thank Mark Malloch Brown of the United Nations Development Programme (UNDP) and Jean-Michel Severino of the Agence Française de Développement for co-hosting the High Level Meeting in Paris, and the Consultative Group to Assist the Poor (CGAP) for organizing the meeting. By taking a hard look at one side of the development equation – our own effectiveness in delivering development assistance – we can take another step toward achieving the Millennium Development Goals (MDGs).

The High Level Meeting gave the top management of our agencies a unique opportunity to tackle the issue of aid effectiveness in a concrete way. Although just one of many areas in which our agencies work, microfinance – or building financial systems that work for the poor – is an appropriate area for reflecting on aid effectiveness because we have already agreed to standards of good practice, but currently do not uniformly apply those standards to our programs on the ground. In fact, the Microfinance Donor Peer Reviews confirmed that we could have a far greater impact with cur-rent levels of spending by aligning our microfinance programs with good practice and building on the diversity of our strengths.

We recognize that microfinance contributes to achieving the MDGs, in particular, the overarching aim of halving extreme poverty and hunger by 2015. But addressing market failures that prevent poor people from accessing the financial services they need is a massive and daunting task. Microfinance is a very dynamic field that has moved from “microcredit” to “microfinance” to “building financial systems that work for the poor”. This changing landscape makes microfinance a particularly challenging area for the development community. It means that we must engage with a diversity of players, from Central Banks to self-help groups, from commercial banks to community savings and loans cooperatives to auditors and credit rating firms, recognizing that there is great scope for a diversity of approaches. When possible, we should support the national plans of governments to develop the overall financial sector. Each of us should contribute in a way that leverages our respective strengths and promotes mutual learning. At the very least, we should avoid actions that distort local financial markets.

The Peer Reviews conducted between May 2002 and November 2003 and the High Level Meeting exposed our agencies to frank and transparent assessments and recommendations on how we can improve the way we work. We held up a mirror to our own internal systems, processes and procedures. These are the factors over which we have the most control and can make more immediate changes. Many of us feel that the methodology, analysis and recommendations of the Peer Reviews are applicable to other areas of development assistance beyond microfinance.

We endorse the five key elements of effectiveness that have emerged from the Peer Reviews, as they provide a useful framework for assessing and benchmarking our performance. They are: 1)strategic clarity and coherence; 2)strong staff capacity; 3)accountability for results; 4)relevant knowledge management; and 5)appropriate instruments. For those among us who wish to remain engaged in building pro-poor financial systems, we commit to do all that we can to achieve basic competency in each of the five elements to ensure

1 Agence Française de Développement, African Development Bank, Asian Development Bank, Canadian International Development Agency, DANIDA, Department for International Development, European Commission, Gesellschaft für Technische Zusammenarbeit, International Fund for Agricultural Development, International Labour Organization, Kreditanstalt für Wiederaufbau, The Netherlands, Norwegian Agency for Development Cooperation, Swedish International Development Cooperation, Swiss Agency for Development and Cooperation, United Nations Development Programme/United Nations Capital Development Fund, U.S. Agency for International Development.

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adherence to basic standards of good practice. We also need to expand the work of the Peer Reviews to include our country-level partners and look for ways to work together more effectively. We have seen that collaboration is not always easy, but we endeavor to search for ways to reduce transactions costs for all involved – ourselves and our partners in the field.

Moving forward, we commit to four action steps to transform the Peer Review recommendations into tangible results for poor people. We request that our technical colleagues translate these steps into a program of work for the next two years. The objective of this continued work is to be more effective in every country by identifying our strengths and appropriate niches, leveraging each others’ strengths, and aligning and harmonizing our operations with country priorities.

Codify good practices. Current joint guidelines of good practice are nearly 10years old, and require updating, both to incorporate the lessons from the Peer Reviews and to make them easier to apply to operations. New guide-lines should include, among other things, a code of conduct for using subsidies to work with the private sector and guidance on the best use of different instruments available to bilateral and multilateral donor agencies. We commit to sending clear, strong messages to all operational staff in at least two areas: (i)a requirement to consult with government, all other donors, and stakeholders before approving any new support in a specific country or with specific institutions to ensure complementarity and avoid undermining others in the market; and (ii)accountability and transparency on performance of the portfolio are more important than “looking good”; and transparency is critical to reaching our shared vision of creating sustainable access to financial services for poor and low-income people.

Share and leverage staff capacity and knowledge. We concur that a strong internal technical capacity is essential to manage or outsource microfinance operations. However, we all cannot and should not make equally intensive investments in building staff capacity and knowledge management systems. Therefore, we should seek to leverage and build on our technical capacity and knowledge by encouraging cross-agency secondments, drawing on expertise in the private sector, investing in our national staff, delegating programs to those agencies with strong technical staff capacity (especially when that technical capacity is decentralized) where appropriate, strengthening and scaling-up networks, engaging in joint training, and building and contributing to common knowledge management systems like an internet portal.

Take the Peer Review process and recommendations to the field. Building on the decentralized structure of many of our agencies, the Peer Reviews should increase the ownership, voice and participation of our colleagues, partners and stakeholders (government and private organizations) at the country level. Activities in selected partner countries should be undertaken to a) obtain the feedback of field-level stakeholders beyond the donor community; and b) test and document cases of collaboration among donors with complementary strengths.

Conduct two-year follow-up. In two years’ time, we plan to reconvene to discuss which steps we are taking, individually and collectively, to implement the Peer Review recommendations. Each of our agencies should assess and track progress towards the recommendations of its Peer Review. As part of the follow up, agencies could choose to undergo a voluntary “checkup” review. These lighter reviews should explicitly incorporate benchmarking of our performance.

The Consultative Group to Assist the Poor

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list of agencies participating in the peer ......microfinance donor peer reviews, conducted from may...

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