Developing Decentralized Financial Services: Project Review

This review examines the performance of the second phase of Decentralized Financial Services (DFS II) in Kenya. It identifies key achievements, lessons learned and makes recommendations for future contributions to financial sector development for the poor. DFS II had the broad goal of developing and testing simple and effective tools and delivery techniques to strengthen operations, management and governance in community based financial organizations in order to develop sustainable decentralized financial systems in Kenya. The project largely achieved its purpose and outputs. DFS used a unique approach to group capacity building, focused on governance and member responsibilities and rights. It was able to demonstrate that enhanced capacity in groups to self-manage and self-govern improves the performance of both groups and the institutions that support them. Lessons from the DFS experience include:

• Type of group affects the value added of interventions;
• Strong partner selection is critical;
• Effective demonstration requires time, willing partners and iteration;
• Intensive and iterative approach of development agency builds buy-in and hence better results;
• Clear and long term monitoring is linked to sustainability and scale.