SmartAid measures whether funding agencies are set up to support microfinance effectively. It is the first index of its kind that promotes transparent external assessments of funders’ management systems. SmartAid helps funders understand how their internal management systems, policies, procedures, and incentives affect their work in microfinance. The process includes opportunities for in-depth discussions and advisory services for technical staff and senior management. By participating in SmartAid, funders demonstrate a strong commitment to transparency and accountability. SmartAid can also help funders understand where they stand relative to other microfinance donors and investors. This provides opportunities to collaborate with other organizations and to identify areas of common interest and comparative advantage.
SmartAid builds on the aid effectiveness work undertaken by CGAP and its members starting in 2002 with the Microfinance Donor Peer Reviews and the country-level reviews. CGAP developed SmartAid in close collaboration with its members; academic advisers, including the Center for Global Development; and microfinance experts. The hypothesis behind SmartAid is that effective policies and practices are a necessary, although not sufficient, condition for successful programs and investments. SmartAid focuses on the quality of funders’ systems and does not evaluate the on-the-ground performance of funders’ microfinance portfolios. Specific tools to determine the quality of programs exist (e.g., portfolio reviews).