The GiveWell Blog

Two charities, one microfinance institution

We’re looking for a good option for U.S. donors interested in supporting microfinance. We’ve been examining the largest, most prominent U.S.-registered charities in this area: Grameen Foundation, Unitus, Accion, Women’s World Banking, Opportunity International and FINCA. All of these are large organizations that list a variety of “partner” microfinance institutions.

One thing that might surprise a donor in this area is that sometimes the “partnerships” overlap. For example, Women’s World Banking lists Enda Inter-Arabe in its network, and so does Grameen-Jameel (which itself is a joint venture of the Grameen Foundation). Neither organization’s profile mentions the other.

Grameen Koota lists the Grameen Foundation and Unitus (among others) as donors and lists Unitus and Accion as consultants. Unitus’s page on Grameen Koota doesn’t mention Accion; Accion’s doesn’t mention Unitus; the Grameen Foundation sounds like its relationship is currently more consultant-like than donor-like.

As you can see from the profiles linked above – and as we’ve found from talking to the large microfinance charities – most (not all) of their activities consist of consulting or “technical assistance,” rather than founding, directly supporting or investing in microfinance institutions. The relationship between them and their “partners” often appears relatively limited, and it’s difficult to pin down who’s responsible for what.

Focusing on technical assistance and consulting isn’t necessarily a bad thing – perhaps U.S. expertise is just what these institutions need to serve more clients and serve them better. But we aren’t sure this is the case – it’s also possible that the U.S. charities have sprung up because of strong donor demand for the “story” of microfinance, and are consulting because they have more than they can productively spend on investing and creating.

What we know is that it’s inherently hard to gauge a charity’s impact when its main activities consist of free (or heavily subsidized) technical assistance. Even if we had all the information we want about the partner MFIs themselves, we’d still need to understand the extent to which help with business planning or product design made a difference to them.

So far, we haven’t seen many signs that the U.S. charities are critically asking this question, or making it possible to hold them accountable for the answer.

Comments

  • Rahmadhita on November 28, 2009 at 10:56 am said:

    One way to give donations for the continuation of microfinance programs is the rotational contribution. Why? Because the funds obtained can be used for one person, and then after that played for other people in a group. Evenly so that each member of the group will benefit from the contributions given. This is a micro finance scheme in the small scale

  • This is a pretty awful summary of microfinance institutions and networks. First, let’s get a few things clear:
    1. Grameen Foundation, ACCION, WWB, and FINCA, and Opportunity International are networks. Unitus is a market accelerator.
    2. FINCA and OI tend to own all of their MFIs. They become FINCA Uganda, FINCA Tanzania, Opportunity Ghana, etc.
    3. Different networks provide different types of technical assistance. Grameen Foundation is very strong in social performance, ACCION is great on investor preparedness, Unitus is wonderful and scaling organizations and helping them manage growth.

    What are the “costs” to the free TA? Ask any MFI and they will tell you that the reporting entailed in any network relationship is hardly free. There is a feedback loop in organizations evading certain networks (I’ve seen as much in the field) because the cost-benefit analysis isn’t sufficiently favorable.

    Finally, networks moved to technical assistance in large part to strengthen organizations so that they could attract non-subsidized commercial financing. Pump priming with grants to make an organization sustainable and scalable in the long term may be a great investment, if done right.

  • Hi Ben, a couple responses:

    • In digging into these organizations’ activities and discussing with them, we’ve come to the conclusion that they can’t be categorized as neatly and simply as you imply. FINCA is a possible exception (they declined to apply for funding from us and have shared no information with us). The others appear to be carrying out a wide variety of activities, all including technical assistance of one kind or another, their “headline descriptions” notwithstanding.
    • I agree with you that technical assistance cannot be fully “free” and that using grants to create sustainable institutions may be a great investment if done right. But even with these points in mind, I believe (a) the technical assistance is still heavily subsidized (b) it is important that the organizations behind it make a strong case for their impact to the people they’re asking for donations.

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