Country Level Effectiveness and Accountability Review (CLEAR): Madagascar

Microfinance in Madagascar: A look at the problems and possible solutions

This paper presents The Madagascar Country-Level Effectiveness and Accountability Review (CLEAR) that took place in Antananarivo from April 26 to May 17, 2005, and included interviews with over 110 representatives from the government, donor community, microfinance/finance sector, and the private sector. The review aimed to:

  • Analyze donor effectiveness in microfinance and help donors better adapt their support for developing financial systems;
  • Assist funders adapt their internal systems to design, implement, and monitor better programs;
  • Help funders identify key gaps in the financial system that inhibit the provision of permanent financial services to poor people.

The review found that:

  • Donors continue to play a key role in the development of microfinance in Madagascar;
  • Microfinance is developing in Madagascar at all three levels of the financial system- micro, meso and macro;
  • However, Malagasy microfinance institutions (MFIs) have the following problems:
    • Structural weaknesses;
    • Lack of support services;
    • Lack of information;
    • Need for resources for supervision and co-ordination;
    • Unstable legal environment;
    • Risk of interest rate subsidies distorting the market.

The review recommends that donors should:

  • Help MFIs clean up their portfolios by conducting targeted missions and introducing sound management practices;
  • Promote best practices of microfinance in Madagascar;
  • Help well-performing MFIs to tailor their services better;
  • Promote the diversification of institutions and approaches in microfinance.

About this Publication

By Moyart, M., Duflos, E., Latortue, A., Lecuyer, F., Isern, J. & Rauch, H.