SmartAid for Microfinance: Interview with UNCDF’s David Morrison

June 1, 2009    

CGAP introduced the SmartAid for Microfinance Index in 2007 as a service to help development institutions supporting microfinance to better understand how internal management systems, processes, and incentives affect their work. Participating funders are scored against 9 indicators and receive a report that details their strengths and weaknesses, highlights examples of good practices, and suggests improvements.

Recently, we spoke with David Morrison, Executive Secretary of the United Nations Capital Development Fund (UNCDF) since September 2008. David said that UNCDF’s inclusive finance team moved quickly to address issues raised by the SmartAid assessment, including greater clarity in strategic vision and comparative advantage, more determined follow-up with partner retail finance institutions on performance-based agreements, and better alignment of recruiting with the group’s needs.

You arrived at UNCDF as it was preparing its second submission to SmartAid. What were your thoughts when you learned about the process?
I’m a huge believer in external peer reviews and in stress-testing systems. I came here as a complete outsider and was immediately attracted to any kind of external validation or challenge to the perceived wisdom within the group. To have a robust, external check I think is a very useful discipline. The way that I have seen the SmartAid process shape work plans inside here is really quite extraordinary.

Why is SmartAid a successful tool for helping you manage change within UNCDF’s inclusive finance team?
I think the fact that it’s done by an external body (CGAP) that has legitimacy is a key thing. As a manager you may know where weak spots are but having some transparent and external review just inherently strengthens your hand. It buttresses your case for internal communications and internal change management.

How has SmartAid helped UNCDF’s work in inclusive finance?
There are several benefits. As we talk to partners we have an objective ranking for ourselves that is useful, particularly in discussion with donors.

"As a manager you may know where weak spots are but having some transparent and external review just inherently strengthens your hand." David Morrison, UNCDF.

There are also tangible benefits in terms of improvements in our processes and our overall effort. I can think in particular of a strong push to improve monitoring of our performance-based contracts, and to be better at internal knowledge management, for which we’ve recently added a new staffer in our New York office.

I have to go before our executive board in May and describe what we accomplished in 2008 and the SmartAid score helps us be as data-driven as we can. For example, if you just look at the issue of our performance contracts, our compliance has gone way up.

So, SmartAid is good for internal change processes, but also very useful as a relative benchmarking exercise. Clearly such things raise the bar because they create a healthy competition to improve.

How quickly did change come about after UNCDF received its first SmartAid score and recommendations?
I think the changes were immediate and my suspicion is that the SmartAid recommendations confirmed things that management already knew about or were thinking about in the middle of the night. So in a certain sense it gave us an opportunity to act immediately.

And probably more by coincidence than by design the inclusive finance group had their whole community of practice together in Cape Town almost immediately on the heels of the report and that allowed them to act on it immediately. You need mechanisms for applying the informal glue that drives coherence, and the thing about SmartAid is that the process is being done by an organization whose legitimacy is above question, and then you essentially need to communicate the results and that’s where the Cape Town retreat was important.

What kind of barriers do you see when implementing change?
In addition to issues like decentralization and the challenge of dealing with staff across several time zones, another barrier would be that we’re not independent actors. We’re part of a system, which is to say that we’re closely aligned with a larger organization that restricts some of our room for maneuver.

So looking forward, what’s your opinion of SmartAid as a tool for helping UNCDF in inclusive finance in the longer-term?
I would certainly advocate regularly participating in SmartAid by UNCDF. We have to continually adapt both as our internal priorities and staff change, and as good practices evolve.

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.