Aid Effectiveness in Microfinance: Evaluating Microcredit Projects of the World Bank and the United Nations Development Programme
This focus note describes CGAPs evaluation of the microcredit portfolios of two aid agencies, namely, the World Bank and The United Nations Development Program (UNDP).The World Bank evaluation reviewed lines of credit, where project resources were used to fund microlending. It did not include the Bank's activities in policy support for governments and technical assistance to MFIs. The UNDP evaluation covered all its microfinance projects. The evaluations revealed that:
- In both agencies, less than a quarter of the projects funding microlending were successful;
- Remaining projects failed to produce long-lasting results;
- Both agencies have talented, motivated staff managing their microcredit;
- Agency environments and systems do not give their staff the right incentives, information and reserves for microcredit.
Top managers in both agencies responded to the evaluations with policy documents and concrete changes that give staff better tools and incentives for effective microfinance. The paper states that the problems identified in the evaluation are not unique to these two agencies. Most microfinance funders face similar challenges and may find the World Bank and UNDP experiences relevant to their own microfinance work.
