Funder Effectiveness

Billions of dollars have been invested in microfinance over the past decade—at least $24 billion as of December 2010. But where is all this money going? And is it being used wisely? Above all, how can we ensure that this funding is used effectively to help the poor?

Official Development Assistance to developing countries reached a historical high in 2010. However, economic downturns and budget constraints have shifted debate in the donor community from simply increasing aid to reducing waste and making aid more effective.

One of CGAP’s core mandates is to support our members’ effectiveness in funding financial inclusion. CGAP works with its members through building staff capacity and increasing accountability for results. To this end, CGAP has offered training for funders’ staff and provides standards and guidelines that help align funders’ activities with good practices.

Building off of many years of supporting Peer Reviews, in 2007 CGAP launched the SmartAid for Microfinance Index, which creates incentives for funders to improve their effectiveness by rating the soundness of their internal systems. To date, 20 funders have participated in SmartAid, with six funders— AFD, IFAD, GIZ, KfW, MIF and UNCDF—having participated in multiple rounds.

CGAP completed the last full SmartAid round in 2013. Going forward, the SmartAid Index is offered as a tool that funders can use with support from consultants certified by CGAP.

Funders can choose one of three options to implement the SmartAid Index: SmartAid Index Self-Assessment, SmartAid Index Accompanied Assessment, or the SmartAid Index Validated Assessment. All participating funders will receive a report detailing an overall score and a score on each indicator with comparison to the median, minimum and maximum performance of other agencies which had previously participated in SmartAid. Funders validating their scores with the support of a CGAP certified consultant will also receive a report with recommendations. Validated scores will be integrated into the overall funder score benchmarks and reports will be made public on the CGAP website.

Funders interested in the SmartAid Index should register online to receive additional information.

Topic Contact: Barbara Scola, Matthew Soursourian

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