A team comprising Nimal Fernando of AsDB, Arlina Tarigan-Sibero of KfW, and Brigit Helms and Alexia Latortue of CGAP, conducted a Donor Peer Review of the United Nations Development Programme (UNDP) and the United Nations Capital Development Fund (UNCDF) in New York from 21-25 October, 2002. The review is part of a 20-agency initiative launched by UK Secretary of State Clare Short and CGAP to tackle aid effectiveness by using microfinance as a test case.

The Peer Review focused on the internal procedures, practices and processes of UNDP to identify success factors and constraints that influence the effectiveness of the agency’s microfinance operations. The review also looked at how UNCDF/Special Unit for Microfinance (UNCDF/SUM), the lead technical unit for microfinance in the UNDP group, can best support UNDP’s Country Offices and relevant units based in New York. SUM organized meetings with over 60 people from UNDP’s Country Offices, including numerous Resident Representatives (RRs) and Deputy Resident Representatives (DRRs), the Sub-regional Resources Facilities (SURFs), Regional Bureaus, the Bureaus for Development Policy (BDP), Management (BOM), and Crisis Prevention and Recovery (BCPR). In addition, meetings were held with the Evaluation Office, Operations Support Group (OSG), Office of Audit and Performance Review (OAPR), the Office of the Administrator, and UNCDF. The team shared initial findings with UNCDF Executive Secretary Normand Lauzon, and UNDP and UNCDF staff on 25 October.

The Peer Review team considered its visit timely, given the on-going UNDP transformation to become a network organization. The review also coincided with the arrival of Peter Kooi as the new SUM Director. The team hopes that this letter to management will contribute specific ideas on how UNDP can improve the quality of its microfinance operations, and how UNCDF/SUM can spread microfinance good practices throughout the UNDP group.

This letter outlines UNDP and UNCDF/SUM’s strengths and challenges, and presents a number of specific recommendations for improving quality and effectiveness. A matrix at the end of the letter provides a summary of the key findings and recommendations organized around six strategic areas. The Peer Review team’s recommendations fall into five main categories:

Achieve a shared agency-wide understanding of pro-poor financial services. UNDP and UNCDF/SUM should develop, and top management should endorse, a common definition of pro-poor financial services and their contributions to poverty reduction and the MDGs
Improve Accountability. UNDP should undergo a portfolio review and integrate transparent mechanisms to improve accountability, as a pre-requisite for results-based management.
Improve Quality. As a top priority, UNDP should take concrete actions and provide incentives to improve and consolidate its microfinance portfolio. Uneven quality of operations could threaten the agency’s brand name as a whole, not just in microfinance.
Retain and strengthen SUM. The vast majority of SUM’s time should be spent on spreading good practices by providing technical assistance to Country Offices.
Leverage. UNDP should leverage its limited resources, experience on the ground, and knowledge infrastructure to become more effective.

Microfinance Donor Peer Reviews

UNDP/UNCDF

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