Asian Development Bank

March 1, 2008    

Score: 57/100

Key Findings

The Asian Development Bank (AsDB) received 57 out of 100 points. Despite an active and highly qualified focal point, AsDB faces significant institutional disincentives and internal constraints to supporting microfinance well.  A major challenge is determining how best to deploy large loans to governments to support microfinance effectively.  The backbone of financial systems—the micro or retail level—is usually best managed by the private sector.  Also, the lack of capacity at all levels of the financial system is a major constraint to increasing poor people’s access to finance, and governments are not always willing to borrow for capacity building programs. Even though AsDB has one of the largest microfinance portfolios among funding agencies, internally, it must compete for management and staff attention against much larger sectors such as energy and infrastructure.  Because it represents a tiny percentage of the Bank’s annual disbursements microfinance also suffers from poor accountability.

Suggestions to Increase Agency’s Effectiveness and Scores

• The Board and senior management should require the consistent application of the Microfinance Development Strategy and institute systems to enable staff to do so.  This will include providing the necessary incentives (e.g., reducing disbursement pressure) and resources (e.g., more dedicated microfinance specialists).
• Develop clear and binding rules for supporting retail microfinance based on the existing Microfinance Development Strategy.  Put in place systems for checking compliance that cover all projects, including components.
• Institute systematic, basic microfinance training for all staff managing microfinance projects and components.  Training should focus on the requirements for sustainable microfinance, project design issues, and reporting for accountability, and can be obtained through a variety of mechanisms such as on-the-job coaching, formal courses, self-study through on-line courses, etc.
• Conduct periodic microfinance portfolio reviews, including credit components.  Such reviews will provide AsDB with a much clearer idea of what works and what does not work well in its microfinance support.
• Require that all programs involving support to the retail level report on core performance indicators, using the guidelines already drafted in-house.
• Enforce performance-based agreements.  Program managers will need senior management’s support, given the political nature of terminating agreements with governments.
• Establish structured mechanisms to enable PSOD to benefit from agency experience/knowledge currently vested in the microfinance focal point.
• Investigate options for how to use and/or restructure loans to governments to enhance AsDB’s ability to work on microfinance with private sector actors.