African Development Bank (AfDB)
African Development Bank (ADB) Letter to Management (--EDITED VERSION--)
May 2002
Executive Summary
A team comprised of Camilla Bengtsson of Sida, Stephan Boven of EBRD, and Elizabeth Littlefield and Alexia Latortue of CGAP conducted a Donor Peer Review of the African Development Bank (ADB) in Abidjan from 6-10 May, 2002. The review is part of a 21-agency initiative launched by UK Secretary of State Clare Short and CGAP to concretely tackle aid effectiveness by using microfinance as a test case.
The Peer Review team focused on the internal procedures, practices and processes of ADB to identify the success factors and constraints that influence the effectiveness of the Bank’s microfinance operations. AMINA and the Task Force provided the team with an orientation to ADB and organized meetings with about 30 staff members. The team briefed President Omar Kabbaj, the AMINA Oversight Committee, and the Task Force on its initial findings on May 10.
The Peer Review team found its visit to be timely given the debate and decisions underway at ADB regarding AMINA and the future role of microfinance in the Bank. The team hopes that this management letter will enrich the internal discussions and provide specific ideas of how the Bank can move toward good practice microfinance.
The analysis of strengths and challenges, and the recommendations included in this letter take into account all of the Bank’s microcredit activities, including the portfolio of country and sector departments and the work of AMINA. The matrix at the end of the letter provides a summary of the key findings and recommendations organized around six strategic areas.
The recommendations depend on whether ADB decides to make a strategic shift toward a new vision of microfinance: the creation of permanent financial systems for the poor. A key element of this shift entails the urgent need to improve the performance of credit components in multisector projects in the country and sector departments. The team suggests that ADB consider its recommendations as a set of actions to take during a short, intensive reform period (1-2 years) to clean up the portfolio and create a positive environment for future work in microfinance.
The Peer Review team’s specific suggested actions for change fall into three main categories:
- Articulate Clear Strategy and Vision. ADB should clarify internally what microfinance is, how it differs from targeted microcredit components and when and how it can contribute to the Bank’s overarching goal of poverty reduction.
- Improve Accountability and Enhance Current Operations. ADB should make it a priority to gather and analyze basic information on the Bank’s portfolio of microcredit components and to introduce performance-based criteria.
- Strengthen the Central Microfinance Unit. ADB should house the microfinance unit in the Private Sector Department and ensure that it is sufficiently staffed to operate as a dedicated internal service unit to task managers in the country and sector departments.
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