Features

Stories of Change: How UNCDF Uses SmartAid as a Management Tool

July 16, 2009    

Over the summer, ten leading microfinance funders will receive reports detailing their results from the second round of CGAP’s SmartAid for Microfinance Index. The pilot round of the Index was conducted in 2007. Two years later, CGAP is investigating how SmartAid fit into ongoing change within the institutions that participated in the pilot. To what extent has SmartAid helped catalyze change and greater effectiveness? In a series of stories, management and staff from microfinance funders share their insights on this question.

For managers at the Inclusive Finance team within the United Nations Capital Development Fund (UNCDF), their participation in the first round quickly proved to them SmartAid’s value as both an independent assessment of their role and effectiveness as a microfinance player, and as a catalyst for change within their organization.

Henriette Keijzers, (former) Executive Secretary (a.i.) of UNCDF, sees the process as a natural and effective evolution in the campaign for greater aid effectiveness within microfinance that took root with the peer reviews facilitated by CGAP with 17 funders of microfinance nearly seven years ago.

“We’ve done friendly peer reviews, we’ve actively engaged in the high level meetings, so it was logical so say: let’s move to the next step of benchmarking organizations and comparing them to one another,” Keijzers recalls of her experience with the pilot round of SmartAid in 2007.

The results that came out of that initial round spurred a range of changes within UNCDF. “The exercise itself, and the preparation for the second submission to SmartAid was very much in-sync with a major reform process that we needed to do internally,” says Henri Dommel, Director of the Financial Inclusion Practice Area at UNCDF. “It really helped us to push forward an agenda that we already knew was important.”

John Tucker, Deputy Director, Financial Inclusion Area, noted that “SmartAid triggered taking a fresh look at something we might not have had at the top of our to-do list. For a lot of other things, such as redrawing our strategic roadmap, it’s certainly a change accelerant.”

For UNCDF, more clearly identifying its role and comparative advantage – a recommendation that emerged from the first SmartAid review – was a critical step taken in 2008, while operational improvements such as better-targeted hiring practices and monitoring of UNCDF’s performance-based contracts were no less important reforms to follow the review.

“We had this nice performance-based contract but what were we doing with that in concrete terms? Did we really apply the kind of built-in discipline to the extent that it should be applied?” Dommel recalls thinking of his experience with the SmartAid submission. "I think we recognized there was a lot of improvement that we could make and that was a clear outcome of the initial SmartAid round.”

Changes, both in terms of strategic vision and also at the operational level, followed hard on the heels of the March 2008 Cape Town retreat where UNCDF Inclusive Finance staff examined the initial SmartAid findings and decided on an action plan to move forward. Makarimi Adechoubou, UNCDF Regional Technical Advisor, says this meeting, and a subsequent SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis conducted during a workshop in Amman, Jordan, showed support for SmartAid’s recommendations and provided the necessary space to discuss and refine UNCDF’s vision.

“We have more clarity now in our vision, and we’ve also tried to be clearer in our roles as facilitator and investor because these were not so clear before,” Adechoubou says. “Also we’ve improved our team by recruiting new staff – both at the regional level and at the national level – with more capacities in the areas where we have some weaknesses.”

UNCDF’s comparatively small size, effective communications channels, and existing change culture helped spur action on SmartAid’s recommendations, says John Tucker.

Chandi Kadirgamar, Evaluation Advisor at UNCDF, says SmartAid helped UNCDF’s Inclusive Finance team more closely align its operational systems with a clearer strategic vision, in particular by ensuring the organization focused on having staff in place with the kind of necessary expertise.

Kadirgamar also noted that SmartAid had triggered questioning among other parts of UNCDF, including UNCDF’s Local Development team. “The ripple effect I’ve seen emerge is the question as to whether there could be a SmartAid/CGAP for local development,” she says.

CGAP’s acknowledged role as a trusted and independent policy and research center on microfinance, and also the general recognition of standards of best practice in the field, are critical factors in SmartAid’s quick acceptance and effectiveness as a benchmarking tool, Kadirgamar says. The complexity inherent in working in other areas – such as community development, or education or water – and the lack of a resource body such as CGAP may make it difficult to replicate SmartAid in other fields, she says.

David Morrison, UNCDF’s Executive Secretary, says participating in the 2007 SmartAid round has been a valuable asset in his promotion of UNCDF’s effectiveness in microfinance, both within the UN structure, and also to donors which are even more vigorous in scrutinizing the value of their investments in the current financial crisis. “I think that organizations in the not-for-profit sector can become complacent if they don’t have a market regime that sorts out the good ones from the not-so-good ones,” Morrison says. “I’m a strong believer in such things and clearly having something like SmartAid, that’s externally-administered, is even better than doing your own diagnostic.”

CGAP is speaking with managers and technical staff from diverse institutions that participated in SmartAid and will be providing further insights into how others have used SmartAid as a tool for change.