Recommendations on Donor Guidelines to Support Microfinance Associations

Publication Date: 30 Jun 2004
Published by: Small Enterprise Education and Promotion (SEEP) Network
Document Type: Paper (Microsoft Word)

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What are the areas that donors should consider in extending support to microfinance associations?

This document provides donor agencies with recommendations for supporting and financing microfinance associations (MFAs). The paper:

• Defines MFAs;
• Outlines the features of three types of MFAs, namely:
  • Microfinance institution networks;
  • Operating alliance;
  • Apex institution.

The paper recommends that donor support to MFAs should be based on:

• Role of the MFA within the industry, with focus on:
  • Providing demand-based provision of services;
  • Representing the interests of members to policy-makers;
  • Promoting transparency;
  • Setting standards of performance;
  • Disseminating information on best practices.
• Membership - The MFAs should have:
  • Microfinance institutions (MFIs) and sub-national MFAs as core members;
  • A tiered membership;
  • Membership criteria based on the goals of the MFA and its role in the microfinance sector;
  • Effective delivery strategies.
• Services offered, with focus on MFAs that:
  • Start with a small number of successful services before expansion;
  • Avoid the duplication of services;
  • Seek out efficient service-delivery strategies.
• Financial viability, with focus on MFAs that:
  • Include strategies to achieve financial viability;
  • Use diverse funding sources;
  • Have strategies for long-term funding.

The document also recommends:

• Donor support to develop an MFA’s institutional capacity to deliver demand-driven services;
• Key indicators that donors should review while analyzing MFA capacity;
• Performance-based funding strategies for donors.

The paper concludes by listing the benefits offered by MFAs.