[email protected] Wholesale Fund Good Practices Global Cordaid portfolio research on supported Wholesale Facilities By Cordaid and Triodos

[email protected] www.e-mfp.eu

Wholesale Fund Good Practices

Global Cordaid portfolio research on supported Wholesale Facilities

By Cordaid and Triodos Facet

Morning session of 25 November 2009



Overview presentation

Introduction (who we are, research context) Wholesale facilities supported by Cordaid Analytical Framework Recommendations for Good Practices

For facilities themselves For donors & support agencies

Q&A



Introduction

Cordaid: Dutch co-financing agency Investment strategy Portfolio: 17 facilities in 8 countries

Triodos Facet: international consultancy firm Specialized in sustainable small enterprise

development, including microfinance Works with MFIs, funds, governmental agencies

Research context Changing context and deeper insights



Research context - I

Cordaid supports 17 microfinance wholesale facilities in8 countries and 3 regions

Latin America:Regional: LA-CIF I, Solidus, Emerging Microfinance FacilityAfrica:Regional: Deutsche Bank Start-up FundNational: Tembeka Social Investment Company (South Africa), MITAF

(Sierra Leone), Launch of Inclusive Financial Sector (LIFS, Liberia), UNCDF (Malawi), MIT Fund (Cameroon)

Asia:Regional: CRS-MAFNational: ABN AMRO (India), FWWB (India), ASA (Bangladesh), NATCCO(Philippines), PEF-MP3 Fund (Phil.), CARD (Phil.), CSDO (Phil.)



Research context -II

Cordaid’s supported facilities are very different in nature:

Legal status (fund, part of MFI, project) Vision (profit, non-profit) Involvement of other financiers/donors (relevance of Cordaid’s

funding) Time frame (temporary, permanent) Type of management (fund manager, investment committees,

staff employed by facility) Geographical outreach (national, regional) Type of MFI’s targeted (mature, emerging, start-up) Products offered (loans, grants, TA)



The following analytical framework is helpful

to classify wholesale microfinance facilities

in three types



Analytical Framework - I

Stage of development of microfinance sector Young Growing Mature

Level of intervention Macro Meso Micro

Role of wholesale facilities Generalists Specialists: TA and funding Specialists: financial services



Analytical Framework - II

MFIsYoung

Growing

Mature

MFIs

Macro

Meso

MFIs

LobbyTA

RegulationSupervision

Funding

Supervision

Supervision

Regulation

Regulation

Macro

MacroLobby

Lobby

Funding

Funding

TA

TA

Meso

Meso



Applying framework: 3 types of intermediaries

TYPE 1:Facilities set up and managed by specialised fund managers that operate

in mature markets. These facilities offer financial services (loans and (quasi) equity) to MFIs. They are for profit, operating under commercial financial conditions

TYPE 2:Facilities set up and managed by mature MFIs that operate in growing

markets. These facilities offer technical assistance and financial packages to replicate the MFI’s model or enhance outreach (a/o creation of MFI outlets in more difficult regions)

TYPE 3:Facilities set up and managed by donors/project teams and operating in

young markets. These facilities provide funds and advice to strengthen and build up macro, meso and retail levels institutions in the microfinance sector



Recommendations for Good Practices - IFor facilities themselves

Similar conclusions as in CGAP Occasional Paper 6:

Clear sense of mission Management with MF knowledge and int. experience Strong leadership able to resist external pressures Segregation of MF from other mandates/responsibilities Adequate information management and internal control Well trained and motivated staff with appropriate incentives



Recommendations for Good Practices - IIFor donors & support agencies

In young and underdeveloped microfinance sectors:

Act with others to set standards & develop macro environment Invest senior staff time & accept little/no disbursement in 1st

years Invest in highly qualified, international knowledge based staff Respect rules set by facility, stick to set standards Set broad, flexible eligibility criteria to not restrict sector

development Base funding on good practice promotion, perform measurement Include clear institutional development plans for meso & macro

institutions



Recommendations for Good Practices - IIIFor donors & support agencies

In growing and developing microfinance sectors:

Accept lead time to reach financial sustainability of facility Stay involved (requires senior staff time) on strategic issues Encourage MFIs to deal with meso level institutions:

membership, cost sharing training/TA, registration with authorities

Insert within facilities clear development trajectories for MFIs, set clear exit strategies and go/no-go criteria



Recommendations for Good Practices - IVFor donors & support agencies

In mature microfinance sectors:

Initiative should come from founder/fund manager Ensure leverage with (semi) commercial sources Have an exit strategy before facility starts operations Ensure that facility has innovative elements (e.g. ‘additionality’,

strong social mission) Ensure that donor/support agency does not become (false)

competitor with parallel funding to MFIs



Recommendations for Good Practices - VScorecard for Social Criteria

Groups of Criteria Weighting Score

1. Depth of Outreach

...1.2. Operating in underserved area

Option a: there are no other MFIs

Option b: there are 3 other MFIs

Option c: there are >4 other MFIs

10

5

0

X

2. Products and services

... Various criteria... same method...

3. Institutions

4. Community Impact / Participation

Total 5



Q&A, reflections, thoughts…

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Thank you!

Occasional Paper is available in the back of the room

For further information:

Cordaid, Gauke Andriesse, [email protected]

Triodos Facet, Tom Baur, [email protected]

Documents

[email protected] Wholesale Fund Good Practices Global Cordaid portfolio research on supported Wholesale Facilities By Cordaid and Triodos