In recognition of the importance that donors still play in microfinance at the country level, CGAP has commissioned David Wright, Former Chief Enterprise Development Adviser with the UK's Department for International Development (DFID), to address the challenge of coordination among in-country donor staff on the basis of actual experience in different countries to date.
Like all ‘species,’ the instinctive behavior of donors in the development of the microfinance industry is to compete—for the most influential, highest impact, most innovative and poverty-oriented projects. But, unlike in the commercial arena, such competition—at least between donors—is invariably counter-productive. Recent experience shows increasing awareness of the need for more active in-country coordination between donors and that closer collaboration can be highly beneficial to all stakeholders in the sector.
The continuing popularity of microfinance in the donor community has resulted in numbers of agencies in every developing country and transition economy seeking to support the development of the microfinance sector. Without coordination between these donors, the effects can be most damaging. Local organizations providing microfinance services (MFIs) are offered assistance from donors on very different terms. They receive different signals from the different donors as to what is expected of them: who they should be targeting, what interest rate they should be charging, what level of delinquency is acceptable, when (if ever) they should be reaching financial sustainability, in what form and frequency reports should be submitted—the list is endless.