Global Cordaid portfolio research on supported Wholesale Facilities

1. Global Cordaid portfolio research on supported Wholesale Facilities By Cordaid and Triodos Facet Morning session of 25 November 2009

2. 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

3. 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

4. Research context - I Cordaid supports 17 microfinance wholesale facilities in 8 countries and 3 regions Latin America: Regional: LA-CIF I, Solidus, Emerging Microfinance Facility Africa: Regional: Deutsche Bank Start-up Fund National: Tembeka Social Investment Company (South Africa), MITAF (Sierra Leone), Launch of Inclusive Financial Sector (LIFS, Liberia), UNCDF (Malawi), MIT Fund (Cameroon) Asia: Regional: CRS-MAF National: ABN AMRO (India), FWWB (India), ASA (Bangladesh), NATCCO (Philippines), PEF-MP3 Fund (Phil.), CARD (Phil.), CSDO (Phil.)

5. 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)

6. The following analytical framework is helpful to classify wholesale microfinance facilities in three types

7. 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

8. Macro Regulation Supervision Meso TA Funding Lobby Macro Regulation Supervision MFIs Meso Mature Funding TA Lobby Macro Regulation MFIs Supervision Growing Meso Funding TA Lobby MFIs Young Analytical Framework - II

9. 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

10. Recommendations for Good Practices - I For 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

11. Recommendations for Good Practices - II For 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

12. Recommendations for Good Practices - III For 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

13. Recommendations for Good Practices - IV For 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

14. Recommendations for Good Practices - V Scorecard for Social Criteria

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16. Thank you! Occasional Paper is available in the back of the room For further information: Cordaid, Gauke Andriesse, gan@cordaid.nl Triodos Facet, Tom Baur, t.baur@triodosfacet.nl