MADAGASCAR - World Bank · 2016-07-11 · While in Madagascar, the review team consulted over 110 stakeholders, including government officials, practitioners, donor staff, and microfinance

MADAGASCAR

October 2005

Manuel MoyartEric Duflos

Alexia LatortueFrancois Lecuyer

Jennifer IsernHubert Rauch

AID EFFECTIVENESS INITIATIVE

COUNTRY-LEVEL

EFFECTIVENESS AND ACCOUNTABILITY REVIEW

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TABLE OF CONTENTS

ACRONYMS AND ABBREVIATIONS ............................................................................................. iv

ACKNOWLEDGMENTS ............................................................................................................... vii

MAP OF MADAGASCAR............................................................................................................. viii

EXECUTIVE SUMMARY ............................................................................................................... 1

I. BACKGROUND .................................................................................................................... 3

II. OVERVIEW OF MICROFINANCE IN MADAGASCAR ............................................................. 5

III. CHALLENGES FACING THE THREE LEVELS OF FINANCIAL SYSTEMS ................................ 8Analytical Framework ..................................................................................................................... 8Structural Fragility of Malagasy Microfinance: A Recurrent Topic .............................................. 8

MICRO ............................................................................................................................................ 8Micro-level Strengths ...................................................................................................................... 8Micro-level Weaknesses ................................................................................................................. 9Micro-level Donor Recommendations .......................................................................................... 11

MESO ............................................................................................................................................ 12 Meso-level Strengths ..................................................................................................................... 12Meso-level Weaknesses ................................................................................................................ 13Meso-level Donor Recommendations ...........................................................................................14

MACRO ........................................................................................................................................ 17Macro-level Strengths ................................................................................................................... 17Macro-level Weaknesses ...............................................................................................................17Macro-level Donor Recommendations ......................................................................................... 18

IV. DONOR SYSTEMS .............................................................................................................. 22Donor System Strengths ................................................................................................................ 22Donor System Weaknesses ........................................................................................................... 22Donor System Recommendations ................................................................................................. 25

ANNEXES ............................................................................................................................... 28 Annex 1 Summary of Financial System Weaknesses, Donor Recommendations, and

Essential Prerequisites ...................................................................................................28Annex 2 The Risks of Subsidies and Subsidized Interest Rates—Some Examples ................... 29Annex 3 Donor Funding Allocated to Microfinance in 2002–2004, and 2005 Commitments ...30Annex 4 Donor Activities ............................................................................................................ 31Annex 5 Donor Microfinance Portfolio ...................................................................................... 32Annex 6 Summary of Projects ..................................................................................................... 33Annex 7 List of Persons Consulted ............................................................................................. 37Annex 8 List of Documents Consulted ....................................................................................... 41

iii

ACRONYMS AND ABBREVIATIONS

ADEFI Action pour le Développement et le Financement des Microentreprises(microfinance development and financing agency)

AECA Association d’Epargne et de Crédit Autogérée(self-managed savings and loan association)

AFD Agence Française de Développement(French development agency)

AfDB African Development BankAFMIN Africa Microfinance NetworkAGEPMF Agence d’Exécution du Projet Microfinance

(executing agency for microfinance project)AIM Association des Institutions de Microfinance non Mutualistes

(association of nonmutual microfinance institutions)APEM Association pour la Promotion de l’Entreprise à Madagascar

(Madagascar enterprise promotion association)APIFM Association Professionnelle des Institutions Financières Mutualistes

(professional association of cooperative financial institutions)ARIZ Assurance pour le Risque des Investissements

(investment risk insurance)BFV Bankin’ny Fampandrosoana ny VarotraBMOI Banque Malgache de l’Océan Indien

(Malagasy bank of the Indian Ocean)BMZ Bundesministerium für Wirtschaftliche Zusammenarbeit und Entwicklung

(German federal ministry for economic Cooperation and development) BNI Banque Nationale pour l’Industrie

(national bank for industry)BOA Bank of AfricaBTA Bons du Trésor par Adjudication

(treasury bills sold at auction)BTM Bankin’ Ny Tantsaha MpamokatraCNMF Coordination Nationale de la Microfinance

(coordinating office for microfinance)CAPAF Programme de Renforcement des Capacités des Institutions de Microfinance en

Afrique Francophone(capacity building program for microfinance institutions in French-speaking Africa)

CECAM Caisse d’Epargne et de Crédit Agricole Mutuelle(cooperative agricultural savings and credit association)

iv

CEFEB Centre d’Etudes Financières, Economiques et Bancaires(financial, economic, and banking research center)

CEM Caisse d’Epargne de Madagascar(Madagascar savings bank)

CGAP Consultative Group to Assist the PoorCIDR Center for International Development ResearchCLEAR Country-Level Effectiveness and Accountability ReviewCNMF Coordination Nationale de Microfinance

(national coordinating office for microfinance)CO-SNMF Comité de Pilotage de la Stratégie Nationale de Microfinance

(steering committee for the national microfinance strategy)CSBF Commission de Supervision Bancaire et Financière

(banking and financial supervision commission)DFS Decentralized Financial SystemDID Développement International Desjardins

(Desjardins international development)DIRECT CGAP Donor Information Resource CenterEC European CommissionEU European UnionFERT Fondation pour l’Epanouissement et le Renouveau de la Terre

(French agricultural finance foundation)FGM Fonds de Garantie Mutualiste

(cooperative guarantee fund)FIRST Financial Sector Reform and Strengthening InitiativeGBF Groupe des Bailleurs de Fonds

(donor group)GEM Groupement des Entreprises de Madagascar

(Madagascar entreprise association)GRET Groupe de Recherche et d’Echanges Technologiques

(technological research and exchange group)GTZ Gesellschaft für Technische Zusammenarbeit

(German development agency)IBS Impôt sur le Bénéfice des Sociétés

(corporate income tax)ICAR International de Crédit Agricole et Rural

(international agricultural and rural credit agency)IDA International Development AssociationIFAD International Fund for Agricultural DevelopmentILO International Labour Office

v

IMF International Monetary FundINSCAE Institut National des Sciences Comptables et de l’Administration d’Entreprise

(national accounting and business administration institute)INTERCECAM Centre de Services des Caisses d’Epargne et de Crédit Agricole Mutuelles

(services center for cooperative agricultural savings and credit banks)IRAM Institut de Recherche et d’Application des Méthodes de Développement

(institute for research on and application of development methods)IS Fund Information Systems FundMAE Ministère Français des Affaires Etrangères

(French ministry of foreign affairs)MAEP Ministère de l’Agriculture, de l’Elevage et de la Pêche

(ministry of Agriculture, Livestock, and Fisheries)MCA Millennium Challenge AccountMEFB Ministère de l’Economie, des Finances et du Budget

(ministry of economy, finance, and budget)MIS Management information systemMIX Microfinance Information eXchangeMFI Microfinance InstitutionsSP Microfinance Support ProjectNGO Non Governmental OrganizationOTIV Ombona Tahiri Ifampisamborana VolaPADANE Projet d’Amélioration et de Développement Agricole dans le Nord-Est

(project for agricultural development and improvement in the northeast)PAIQ Programme d’Appui aux Initiatives de Quartier

(neighborhood initiatives support programPAR Portfolio at RiskPRBM Projet de Réhabilitation du Périmètre du Bas-Mangoky

(Bas-Mangoky perimeter redevelopment project)PRSP Poverty Reduction Strategy PaperRDSP Rural Development Support ProjectSIDI Société d’Investissement et de Développement International

(investment company for international development)

vi

ACKNOWLEDGMENTS

The CLEAR team wishes to thank all the people who dedicated their time to participating in thereview. We especially appreciate their willingness to meet with us, often more than once. From theMalagasy government, we wish to thank the various ministers, their staffs, and the Commission deSupervision Bancaire et Financière (CSBF), who met with us and shared their experience with us.From the donor community, Emmanuel Haye and Denis Castaing from Agence Française deDéveloppement and Delphin Randriamiharisoa from the European Commission served as primemovers in promoting this initiative to improve aid effectiveness, for which we are extremely grateful.Finally, we extend our thanks to the Malagasy directors of the microfinance associations (APIFM andAIM) who helped us considerably with our analytical work. Our heartfelt thanks also go out to ZoeGardner, Hannah Siedek, Aude de Montesquiou, and Jocelyne Ratahiriarinov for their excellentsupport in preparing this CLEAR.

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Indian Ocean

Foumbouni

Dzaoudzi

Ambovombe

Farafangana

Ihosy

Ampanihy

Morombe

Morondava

Manakara

Mananjary

Nosy Varika

Mahanoro

Ampasimanolotra

Miandrivazo

Ambositra

Ambohimahasoa

Ambalavao

Antsirabe

Maintirano

Ankavandra

Ambatolampy

MoramangaTsiroanomandidy

Maevatanana

Ambakireny Fenoarivo Atsinanana

Andilamena

Ambatondrazaka

Befandriana

Antsohihy Andapa

Maroantsetra

Iharäna

Sambava

Antalaha

Ambilobe

Sosumau

Andoany

Marovoay

Tôlanaro¨

Fianarantsoa

Toliara

Toamasina

Mahajanga

Antsiranana¨

Moroni

Antananarivo

Îles Glorieuses (France)

Nosy Mitsio

Mayotte(Administered by France,

claimed by Comoros)

Grand Comore

AnjouanMoheli

Île Chesterfield

Îles Jaun de Nova(France)

Nosy Barren

Nosy Sainte Marie

Nosy Be

Comoros

45° 50°

15°

20°

25°

0 50 100 km

0 50 100 ml

MAP OF MADAGASCAR

viii

MADAGASCAR CLEAR—EXECUTIVE SUMMARY

The Madagascar Country-Level Effectiveness and Accountability Review (CLEAR) was conductedin Antananarivo from April 26 to May 17, 2005. The CLEAR analyzes donor effectiveness in micro-finance and helps donors better adapt their support for developing financial systems (savings, loans,insurance, transfers, etc.) that benefit the poor. CLEARs are part of the Consultative Group to Assistthe Poor (CGAP) Aid Effectiveness Initiative, which was launched in 2002 with a series of 17Microfinance Donor Peer Reviews. CLEARs help funders adapt their internal systems to design,implement, and monitor better programs. They also help funders identify key gaps in the financialsystem that inhibit the provision of permanent financial services to poor people. The three levels ofthe financial system are the micro level (e.g., retail institutions), the meso level (e.g., apex, technicalservice providers), and the macro level (e.g., regulations and policies). While in Madagascar, thereview team consulted over 110 stakeholders, including government officials, practitioners, donorstaff, and microfinance clients.

Donors continue to play a key role in the development of microfinance in Madagascar. In 2005,Malagasy microfinance served 70,000 clients for loans and more than 500,000 clients for savingsthrough a large number of points of service. Despite the political and economic crises affecting theisland, Malagasy microfinance grew at a remarkable pace between 1999 and 2004, with an increaseof 246 percent in the number of members and an increase of over 100 percent in the volume ofsavings and credit.

Microfinance is developing in Madagascar at all three levels of the financial system (micro, meso, andmacro). At the micro level (financial services providers), there are many stakeholders and growinginterest from banks and private investors. Microfinance institutions (MFIs)1, cooperatives and non-cooperatives, play a predominant role, with the Caisse d’Epargne and the postal system also playinga major role. At the meso level (support services suppliers), services such as training or auditing areavailable. At the macro level (policy, regulatory framework, and supervision), supervision andcoordination are in place, and a legal framework specifically for microfinance is being introduced.

However, Malagasy microfinance remains fragile. Malagasy MFIs have structural weaknesses atseveral levels: governance, portfolio management, internal control, human resources, and lack offinancial sustainability. For example, MFIs have, on average, a negative return on assets and portfoliosat risk (PAR) in excess of 11 percent. Microfinance support services are rare and of unequal quality. Also,there is a lack of reliable information on financial performance. At the macro level, the supervisoryand coordinating bodies have limited resources, and the legal framework is in a state of flux. There isa risk that interest rate subsidies will distort the market; the involvement of the Ministry of Agriculture,Livestock, and Fisheries is not always consistent with the National Microfinance Strategy. Moreover,the legal system is not sufficiently reliable to help further develop the financial sector.

In light of these weaknesses, donors have a fundamental role to play in consolidating the developmentand guaranteeing the sustainability of microfinance in Madagascar. Pulling back from this role wouldhave negative effects on the country’s development.

The CLEAR recommends that, at the micro level, donors help MFIs clean up their portfolios byconducting targeted missions and introducing sound management practices. Donors have access tobest practices in microfinance and should be committed to promoting them in Madagascar. Generally,it is essential that donors help well-performing MFIs tailor their services better. The CLEAR alsofinds that donors should promote the diversification of institutions and approaches in microfinance,for example by creating a microfinance bank.

1

__________________________1 In Madagascar most MFIs follow the cooperative model and are referred to as systèmes financiers décentralisés (SFD) ordecentralized financial systems (DFS).

At the meso level, donors must improve their investment in training by promoting the availability oflocal training that is clear, accessible, and sustainable. The CLEAR recommends that donors establishmultidonor funds that are freely accessible for technical support to the microfinance sector. Donorsmust take steps to improve governance within MFIs, particularly regarding cooperative institutions.Donors need to encourage the merger of the two professional associations and to support theresulting organization. Finally, the CLEAR recommends that donors promote the emergence of asustainable system for refinancing MFIs.

At the macro level, donors should help the government maintain an environment conducive to micro-finance. Donors need to recognize the risks associated with subsidizing rates and phase out thispractice. Donors could help the various microfinance stakeholders clarify their roles. Finally, donorsshould promote capacity building at the CSBF.

To implement these recommendations, donors must improve their own systems. Donors should ensurethat their staff know enough about finance to be able to manage microfinance programs. Donorsshould disseminate and implement the key principles set forth in the National Microfinance Strategy.They need to strengthen performance-based management programs, especially with service providers.All donor involvement should be aimed at ensuring the sustainability of microfinance, and the toolsavailable to donors must be better adapted to the requirements of microfinance.

MADAGASCAR

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Malagasy microfinance needs donor support to:

l Reduce the fragility of the MFIs

l Develop subsidies for training, but not for interest rates

l Establish multidonor funds freely accessible for technical support

l Promote MFI transparency

l Help the government maintain a favorable environment

l Clarify the roles of the various stakeholders

l Build the capacities of the CSBF

Internally, donors need to:l Ensure that their staff are qualified in finance

l Apply the key principles of the National Microfinance Strategy

l Reinforce performance based management with service providers

l Reactivate their coordination

I. BACKGROUND

In early 2002, the Consultative Group to Assistthe Poor (CGAP) and a group of leading donoragencies launched an Aid EffectivenessInitiative, using microfinance as a test case. Inits first stage, between April 2002 andNovember 2003, the initiative sponsoredMicrofinance Donor Peer Reviews of 17bilateral and multilateral development agencies.The peer reviews helped donors look them-selves in the mirror and focus on what theycould most directly influence: their ownprocedures, processes, practices, and systems.Top management and staff of the participatingagencies appreciated the frank and actionablerecommendations of the review teams.All agencies are currently implementingrecommendations, with promising results.2

The peer review exercise culminated in a high-level meeting in February 2004 called“Leveraging Our Comparative Advantage toImprove Aid Effectiveness.” At that meeting,lessons learned from the reviews weresynthesized and steps for further collectiveaction were discussed. Following the meeting,the 17 agencies issued a joint memorandum thatendorsed five core elements of donor aid effec-tiveness in microfinance (the “aid effectivenessstar”): (1) strategic clarity, (2) staff capacity,(3) accountability for results, (4) relevantknowledge management, and (5) appropriateinstruments. The agencies also committed toa four-step work program, including a mandateto expand the aid effectiveness work to thefield.

CGAP member agencies jointly designed theCountry-level Effectiveness and AccountabilityReviews (CLEARs).3 CLEARs focus on strate-gic issues relevant to donor effectiveness. Theyare not comprehensive sector studies thatdeeply analyze financial systems developmentas do the Financial Sector AssessmentPrograms. Rather, CLEARs rely on an inter-view-based methodology and literature reviewto measure development agency systems andpractices against the concrete and specificchallenges of building an inclusive financialsystem in a particular country. CLEARs striveto help funding agencies identify gaps infinancial systems and to design interventionsthat build on their respective comparativeadvantage. CLEARs also aspire to motivatedonors to improve their internal procedures andsystems so they can work more effectively withothers in the field, thus better contributing topoverty reduction and to the MillenniumDevelopment Goals (MDGs).

The vision of an inclusive financial system isclient centered. It is based on the assumptionthat financial services play a critical role inreducing poverty by enabling poor people toaccumulate and manage assets, conductfinancial transactions, manage cash flows,invest in their businesses, and reduce theirvulnerability to external shocks.

Five CLEARs will have been conducted fromOctober 2004 through December 2006. The firstCLEARs took place in Cambodia in October2004,4 and in Nicaragua in February 2005.

The third CLEAR was conducted in from April26 to May 17, 2005. The CLEAR team com-prised Eric Duflos, Alexia Latortue, andJennifer Isern from CGAP; François Lécuyerand Emmanuel Moyart, consultants; and HubertRauch from GTZ. The team spent a total of12 staff weeks in country and consulted over110 persons representing a broad cross-sectionof stakeholders, from government officials to

COUNTRY-LEVEL EFFECTIVENESS AND ACCOUNTABILITY REVIEW

3

__________________________2 For more information on Microfinance Donor Peer Reviews,visit www.cgap.org/projects/donor_peer_reviews.html.

__________________________3 Seventeen agencies, including Agence Francaise deDéveloppement, African Development Bank, AsianDevelopment Bank, the European Commission, Finland,GTZ, ILO, the Netherlands, Sida, and USAID, took part indrafting the Terms of Reference.4 For more information on CLEARs, visit www.cgap.org/clear.

Relevant KnowledgeManagement

Effectiveness

Strategic Clarity

Strong StaffCapacity

Accountability for Results

AppropriateInstruments

MFI managers and staff to representatives ofdonor agencies, investors, and microfinanceprojects. Local interviews were supplementedby the team’s exhaustive review of the existingliterature on Malagasy microfinance. The teamalso gathered information through question-naires followed by telephone interviews of keystakeholders based abroad. Finally, the teampresented its initial conclusions to all stake-holders at two wrap-up meetings in Antananarivoon May 17 and at a press conference.

This report is addressed to all funders thatsupport microfinance in Madagascar. It providesexamples of good practice from among thedifferent funders in the country, but does notseek to assess the work of individual fundingagencies. Instead, the report provides a snapshotof key issues facing the development community

engaged in microfinance and offers concreterecommendations on how to tackle them.Selected funding agencies will receive anindividual assessment that focuses on specificissues pertaining to their own effectiveness.

This report begins with a brief overview ofmicrofinance in Madagascar (Section II).Section III presents an analysis of the challengesfacing the three levels of the financial system(micro, meso, and macro). For each of theselevels, strengths and weaknesses are examined,followed by specific recommendations aimed atbringing donor support more in line withdemand and helping them build an inclusivefinancial system. Section IV delineates thestrengths and weaknesses of donor operatingsystems and makes recommendations aimed atimproving their effectiveness in Madagascar.

MADAGASCAR

4

II OVERVIEW OF MICROFINANCE IN

MADAGASCAR

Social, economic, and political context

Madagascar is a large country (587,000 km2),with a low population density (17 millioninhabitants). The vast majority of the populationis rural (80 percent), and there are many land-locked areas. Poverty affects 70 percent of thepopulation; 85 percent of the poor live in ruralareas, according to the 2003 Poverty ReductionStrategy Paper (PRSP). High population growth(2.8 percent annually), a weak educationsystem, and a high illiteracy rate contribute tokeeping the poverty level high.

The transition toward a market economy thatoccurred in 1990–2000 had painful economicrepercussions and led to political problems. Thisdifficult period lasted until 2002, whenMadagascar experienced a serious political andeconomic crisis. Although the political situationimproved with the election of the president nowin office, the economic situation deteriorated inlate 2004, with a sharp hike in inflation, asizable devaluation, and increase in the price ofrice—the basic foodstuff for the majority of thepopulation. The lingering effects of the ricecrisis are still in the minds of the residents ofthe capital city who suffered the most from it,and rice prices again began to move upwardsbeginning in June 2005.

The outlook for 2005 is expected to be morefavorable thanks to economic growth andincreasing control over the inflation rate. Theongoing reforms, social development, andmacroeconomic stabilization efforts enabledMadagascar in October 2004 to reach the“completion point” for the Heavily IndebtedPoor Countries (HIPC) Initiative and to obtainsubstantial external debt cancellations (US$ 3.4billion out of a total of US$ 4.5 billion).According to the OECD’s African EconomicOutlook 2004/2005, the projected growth rate ofMadagascar for 2005 is 6 percent.Notwithstanding the recent progress, there is asizable infrastructure deficit in both physicalterms (e.g., roads and telecommunications) andin legal terms (e.g., land records, enforcement

of the penal code, recovery of guarantees, andthe reduction of corruption). The sustainabledevelopment of agriculture is yet another majorchallenge Madagascar will have to meet in themedium term. By way of illustration, agriculturaloutput per hectare is among the lowest in theworld.

Financial sector developments

Until the 1990s, the financial sector was largelycontrolled by the state and reflected dirigistpolicy approaches. The banking system wasmade up of sector-specific banks—anagricultural bank, a foreign trade bank, andso forth.

In the late 1980s, the Malagasy economy wasexposed to free market principles under theadjustment programs supported by the WorldBank and the International Monetary Fund. Inthe 1990s, the banking system was completelyprivatized and rehabilitated. The national bankswere purchased by major foreign groups (e.g.,BTM by BOA, BNI by Crédit Lyonnais, andBFV by Société Générale), and CMB now hasa Chinese majority shareholder. Comparedwith the banking sectors of other developingcountries, Madagascar’s banking sector isrelatively sound and well capitalized. It includesseven commercial banks, two finance institu-tions, at least four insurance companies, theCaisse d’Epargne de Madagascar (CEM), and ahighly developed network of postal savingsbanks.

A 1995 banking law made the Central Bank’sBanking and Financial SupervisionCommission (CSBF) responsible for bankingsupervision. The integration of microfinanceinto the formal financial sector is off to a goodstart in Madagascar. The traditional bankingsector is showing increasing interest in partici-pating in the development of microfinance,which it tends no longer to regard as a fringeactivity of the financial sector but rather as agenuine market. Indeed, while the traditionalbanking sector holds the majority of assets inthe financial sector, from the standpoint of thenumber of borrowers, microfinance is now themain source of financial services for the peopleof Madagascar.


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Major stakeholders in Malagasymicrofinance

Microfinance in Madagascar involves a sizablenumber of stakeholders in various areas ofactivity.

Microfinance providers. Microfinance supply iscovered by many financial services suppliers.There are 477 points of service, a vast majority ofwhich are cooperative financial institutionsknown as Decentralized Financial Systems(MFIs), but they also include noncooperativefinancial institutions, joined recently by at leastone bank. The first MFIs were established in theearly 1990s and achieved formal status shortlythereafter: in 1993 for Caisses d’Epargne et deCrédit Agricole Mutuelle (CECAMs ) and in1994 for Ombona Tahiry Ifampisamborana Vola(OTIVs ). The Bank of Africa (BOA), formerlyBankin’ Ny Tantsaha Mpamokatra (BTM), has asizable network and contact with the rural popu-lation, making it one of the most important stake-holders in microfinance (both for direct distribu-tion of services and for refinancing of networks).

Financial services also are offered throughpublic institutions, such as Caisse d’Epargnede Madagascar, which is currently being priva-tized, and Paositra Malagasy (Madagascar Post).

Professional associations. The ProfessionalAssociation of Cooperative FinancialInstitutions (APIFM), founded in 1997, coversall cooperative institutions. Nonmutual institu-tions are grouped together in the Association ofNon-Mutual Microfinance Institutions (AIM),founded in 1999.

The government. The Ministry of Economy,Finance, and Budget (MEFB) is the supervisoryministry for microfinance. Coordination isprovided by the government mostly through theNational Coordinating Office for Microfinance(CNMF), which reports to the MEFB throughthe Treasury Directorate. A National Micro-finance Strategy (SNMF) was approved by allstakeholders in 2004. Its coordinator is based inMEFB, while a steering committee for SNMFbrings together the major stakeholders.

CSBF is responsible for the regulation andsupervision of microfinance. Microfinance

activities were structured and organized in themid-1990s. A banking law was promulgated in1995. The law on savings and loan cooperativesdates from 1996. The first cooperative institu-tions were licensed in 1999. A new law onmicrofinance, covering all MFIs, whethercooperatives or not, has just been adopted.

The Ministry of Agriculture, Livestock, andFisheries (MAEP), which turned the responsi-bility for microfinance over to MEFB, stillmanages several credit components relating torural development projects.

Funders. Most funding is still provided bydonors, but the contribution from savings andlocal banks is increasing. The latter refinanceMFIs and take equity positions directly in someMFIs. Some national and international privateinvestors are involved as well. Many of thesefunders work directly with national and interna-tional service suppliers to support financialservices providers.

Customers and recent growth

Microfinance in Madagascar showed significantgrowth over 1999–2004. The number of mem-bers of cooperative institutions increased by 246percent, and the number of loans in the portfoliorose by 290 percent. This growth continueddespite the 2002 crisis. From 2002 to 2004, thenumber of clients/members grew by 40 percent,savings balances rose by 110 percent, and out-standing loans increased by 119 percent. In2004, average savings came to MGA 110,000,and average loan volume was MGA 428,000.Exchange rate in 2004 was 1,868.9 Malagasyariary per US dollar and was of 2,003 Malagasyariary per US dollar in 2005.

MADAGASCAR

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Box 1. Main Microfinance Providers

l Cooperative financial institutions that aremembers of APIFM: URCECAM, TIAVO, OTIV,AECA, and ADEFI

l Nonmutual financial institutions that aremembers of AIM: SIPEM, Vola Mahasoa,APEM/PAIQ, and APEM Farahitso

l Bank: BOA

l Caisse d’Epargne de Madagascar

l Paositra Malagasy

Despite growth in client base, the microfinancepenetration rate in Madagascar remains low.Indeed, according to UNDP’s MicrofinanceSupport Project (MSP), microfinance hasreached only 6 percent of its potential market

and covered only 2 percent of the potentialdemand for credit. As for savings, the coveragerate is 30 percent when the Caisse d’Epargne deMadagascar (CEM) is included and just 4.4percent when it is excluded.


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Growth in the Number of Members and Loans in APIFM and AIM Portfolios, 1999–2004

Sources: 1999–2001, APIFM, and 2002–2004, APIFM and AIM.

Growth in Volume of Savings and Lending, APIFM and AIM (in millions of ariary)

Sources: 1999–2001, APIFM, and 2002–2004, APIFM and AIM.

62,408

15,209

91,964

20,492

116,977

26,350

143,779

36,378

175,360

43,096

216,157

59,284

-

50,000

100,000

150,000

200,000

250,000

1999 2000 2001 2002 2003 2004

Members Loans in the Portfolio

10,372 12,768

18,992 21,339 21,803

28,016

-

5,000

10,000

15,000

20,000

25,000

30,000

2002 2003 2004

Potential Savings Potential Loans

III. CHALLENGES FACING THE

THREE LEVELS OF FINANCIAL

SYSTEMS

Analytical framework

Microfinance is growing rapidly. Internationaldevelopment agencies have recently adoptednew guidelines on good practice that will beupdated regularly to keep pace with innova-tions.5 These guidelines show that the integra-tion of microfinance into the formal financialsystem enables it to reach a maximum numberof clients and have an optimum impact.

The full integration of microfinance into theformal financial sector calls for work at all threelevels of the financial system: micro, meso, andmacro. Although institutions that offer micro-finance services (micro level) constitute thebackbone of the financial system, they also needsuppliers of support services (meso level) totrain their staff, improve their systems, andenhance their transparency. Policies, regula-tions, and supervision must provide rules ofthe game that are conducive to the sound andrapid development of the various stakeholders(macro level).

Structural fragility of Malagasy micro-finance: A recurrent topic

Microfinance in Madagascar is expandingrapidly, but is still structurally fragile. Thisfragility affects all levels of the financial

system. It includes MFIs in regard to theirfinancial structure and governance. It relates tosupport services, such as information tech-nology, auditing, and training, which remaindifficult to obtain and of mixed quality. It alsoextends to the regulatory and supervisory area,which is poorly equipped to deal with a growingfinancial sector. To permit the rapid and soundexpansion of microfinance, these fragilitiesmust be reduced considerably.

Donors still have a crucial role to play inconsolidating microfinance in Madagascar. Thisreport outlines specific steps donors can take toimprove their support, which remains essentialfor viable microfinance. It builds on the visionof the National Microfinance Strategy aimed atensuring that Madagascar has a professional,viable, and sustainable microfinance sector thatis integrated into the financial sector, diversi-fied, and innovative—one that covers demandto a satisfactory degree and functions within alegal, regulatory, tax, and institutional frame-work that is appropriate and favorable.6

MICRO

MFIs must be structurally strong to offersustainable and high-quality services to theirclients. Despite their significant presence andgrowth, most MFIs in Madagascar are far fromachieving financial and institutional sustain-ability. Given that the micro level is the back-bone of the financial system, this fragility posesrisks to the system as a whole.

Micro-level strengths

Growth of inclusive financial services despiterecent difficult circumstances. In 2002–2004,all types of MFIs grew despite the serious polit-ical crisis of 2002 that paralyzed the country forsix months. The survival of these institutionsbears witness to their tenacity and commitment.

Large number of points of service. Thanks tothe large number of bank branches, savingsbanks, and post offices, the Malagasy financialinfrastructure has immense opportunities formicrofinance development. For example, with

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__________________________5 CGAP. “Building Inclusive Financial Systems: DonorGuidelines on Good Practice in Microfinance.” Washington,D.C.: CGAP, 2004.

Box 2. Three Levels of the Financial System

Micro: Retail financial service institutions (e.g.,NGOs, finance companies, banks, financial coopera-tives, and other suppliers, such as moneylenders,agricultural traders, etc.)

Meso: Service providers and industry infrastructure(e.g., networks, trainers, auditors, informationtechnology providers, wholesale financing facilities,credit bureaus)

Macro: policy, laws, and the regulation andsupervision framework (e.g., banking regulations andinterest rate policy)

__________________________6 See the national strategy (SNMF) in the bibliography.

its seven banks and 117 branches, the bankingnetwork is relatively extensive compared withother like countries. Fortunately, most of thenetwork was preserved when the banks wereprivatized. Caisse d’Epargne is solidly estab-lished, with 19 branches (created following itsseparation from the postal system in 1995) andespecially its 770,000 passbook savingsaccounts, of which roughly a third are active.Half of these passbook accounts are held bylow-income clients. The postal system is themost extensive network by far, with 230 multi-service offices, 30 rural post offices, 150 postalagencies in the bush, and a project on PostalService Points with merchants. In February2005, its clients held 44,000 postal checkingaccounts and 77,000 passbook accounts.

Sizable presence of MFIs in rural areas. Usingthe division of the country into 20 agro-ecological regions as defined by MSP (statisticsas of 30 June 2003),7 only two regions have nopoint of service (Betsiboka and Melaky).However, several regions have sparse coverageby MFIs extending credit (Atsimo-Andrefana,Mangoro, Tolagnaro, Atsimo-Atsinana, andHorombé), and there are disparities betweenregions. This relatively good representation inrural areas is essential in view of the high levelof rural poverty. Rural finance remains one ofthe major challenges facing microfinance, andmany other countries could draw lessons fromthe Malagasy experience.

Large number of savers. Often called the“forgotten half of microfinance,” savings areparticularly well developed in Madagascar.MSP estimates indicate a 30 percent penetrationrate for savings when all accounts with Caissed’Epargne are considered.

Increasing linkages among the bankingsector, private sector, and microfinance. BOAconstitutes a good example of the banking sec-tor’s growing interest in clients who are lesswell off. It is already offering microcreditservices through its 30 branches to about 6,000grouped clients. In addition, banks are begin-ning to invest in the capital of MFIs. The boxbelow provides additional information.

Desire of some cooperative institutions toadapt their structure to the environment.Cooperative institutions, such as TIAVO, theOTIVs, or CECAM, have modified theirstructures and innovated in order to adapt tolocal circumstances. They have found solutionsfor improving their profitability while meetinglocal demand, for example by placing tellerwindows linked with their branches in remoteareas and by grouping certain branches. Anotherinnovation is the creation of apex structures theyseek to convert into joint limited companieslicensed to function as financial institutions(INTERCECAM authorizations have beenobtained for CECAMs).

Micro-level weaknesses

One distinguishing feature of microfinance inMadagascar is the relative fragility of MFIs.This fragility is described below, with particularreference to comparisons with the statisticsobtained by the Micro Banking Bulletin (MBB),which assembles financial information on MFIsthroughout the world.


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__________________________7 This division closely resembles the new administrativedivision, which features 22 regions.

Box 3. Participation of Banking Sector andPrivate Sector in Microfinance

Banking Sector

l BNI has a 15 percent participation in SIPEM

l BOA, BMOI, and BFV are in competitivebidding for an opening of the capital ofADEFI

Private Sector

l GEM/APEM participation in SIPEM

l SIDI participation in SIPEM

Private Sector (with a focus on investment)

l Crédit Agricole of France (3 regional banksthrough an investment structure) inIntercecam

l ICAR (Intercecam and new MFIs to becreated)

l Aga Khan Group

Note: The banking sector and the MFIs also arelinked commercially. The banks can refinance theMFIs, accept deposits from them, guarantee theirassets, etc. This aspect is addressed in the sectionon the meso level.

1. Structural fragility of the MFIs

Governance problems. There is a serious gover-nance problem among cooperative institutionsthat make up the vast majority of MFIs inMadagascar. The market as a whole is thusmade more fragile. Several difficulties areapparent:

l Volunteer work may make some electedheads not as motivated and lead to frequentdepartures before the end of terms. Theneed to engage in remunerated activity isnot always compatible with their mission.

l Some managers lack the training and skillsin management and finance to carry outtheir duties effectively.

l Some social behaviors are inconsistent withthe cooperative principle: favoritism inextending credit, embezzlement, and settingpoor examples regarding loan repayment.

The cooperative institutions often are poorlymanaged as a result. Relationships betweensalaried technicians and elected officers aresometimes tense, particularly regardingdecision making and allocation of work withininstitutions.

There also are governance problems betweenapex institutions and cooperative banks. Forexample, cost allocation policies are not alwaysclear. These issues are important because theycan jeopardize the overall financial equilibriumof networks in a context in which subsidies fornetworks are tending to decline.

Poor portfolio management. According to datagathered as part of a recent study by the MIXand CGAP,8 the ratio of PAR for over 30 days atend-2003 is 11.6 percent for the nine majorMFIs in the country (ADEFI, 5 OTIVs, SIPEM,TIAVO, and UNICECAM). This ratio isextremely high compared with world averages.It is recommended that PAR > 30 days notexceed 3–5 percent. A sizable PAR poses a costburden (decreased interest income, increasedcollection costs, larger reserves provisioning, etc.).The sustainability of these institutions is thus

achieved belatedly, and the additional costs arereflected in the interest rate charged to clients.

Lack of internal systems and controls. In aperiod of growth, this weakness poses evengreater risks, and many of the individualsinterviewed referred to many instances ofmisappropriation. Computerized managementinformation systems (MIS) are still not in wide-spread use. Even where procedures are in place,it is difficult to monitor activity closely. Thislack of technical resources is compounded bythe problems of introducing efficient internalcontrols attributable to insufficient human andfinancial resources.

Scarcity of human resources. The recruitmentand management of human resources arechallenges for MFIs in Madagascar, particularlyfor those established in rural areas. The scarcityof skilled staff leads to sizable recruitment andtraining costs. It is particularly difficult to findqualified staff in rural areas or to attract suchstaff from the cities. In addition, there is consid-erable turnover among staff, who are constantlyattracted by new opportunities.

Problems in achieving financial sustainabilitywithout subsidies. According to MIX statisticsfrom end-2003, Madagascar’s nine major MFIshad a total return on assets of -3.3 percent.Even taking the particularly difficult rural con-text into account, this figure raises no prospectsof financial sustainability in the short term. Thefigure for return on assets weighted by volumeof assets for Madagascar is well below theaverage returns in Sub-Saharan Africa (1.6percent). The low productivity of MFIs, with29 borrowers per staff member as comparedwith the world average of 139 (MIX data forend-2003), is another drag on achievingsustainability. Finally, relatively high bank ratesgive MFIs no incentive to seek commercialfinancing. This engenders a “donor culture” thatis contrary to the vision of sustainability.

2. Supply not fully meeting demand

Inadequate supply of credit. The demand forcredit is not adequately covered, particularlyregarding medium- and long-term credit.MFIs, as a whole, cover only about 70,000 loancustomers, with outstanding credit estimated

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__________________________8 “Overview of the Outreach and Financial Performance ofMicrofinance Institutions in Africa,” MIX, April 2005,www.mixmarket.org/medialibrary/mixmarket/Africa_Data_Study.pdf.

at MGA 30 billion at end-2004. There areseveral reasons for the limited number of bor-rowers: (i) methodological shortcomings, suchas requiring real guarantees that poor clientshave difficulty providing; (ii) the attractivenessof placing assets in Treasury bills (BTAs) withrates of about 20 percent as compared to loanportfolios; and (iii) the fact that most depositsare short-term provides no incentive for MFIs togrant medium- and long-term loans.

Micro-level donor recommendations

Although these recommendations are addressedto donors, close cooperation between donorsand key stakeholders in microfinance, namelypractitioners, the private sector, and govern-ment, is required for success.

1. Help MFIs reduce their fragility.

MFIs suffer from structural fragilities. Toaddress this problem, four lines of actiongrowing out of the vision defined by theNational Microfinance Strategy are suggested.

Provide MFIs with incentives to improve port-folio quality. Donors could finance technicalassistance targeting MFIs to resolve thisproblem as rapidly as possible: (i) introduceportfolio rehabilitation plans that includespecial procedures for recovering arrears, thecreation of teams devoted to collections, and theestablishment of targets and incentives systemsfor these teams; (ii) finance studies on thecauses of the arrears to remedy and preventthem; (iii) promote the adoption of inter-national standards for calculating PAR (that is,monitor the portfolio at 30 days or more and notat 90 days as is often the case in Madagascar)and the dissemination of other quality standardsfor portfolio management (e.g., provisioningrules).

Finance studies on MFI costs and revenue.Donors could support MFIs in the analysis oftheir cost and revenue structures. This shouldenable them to gain better knowledge of andmastery over their expenses and possibly torevise their fees, always with a view toachieving greater efficiency and financialviability.

Encourage MFIs to professionalize theirgovernance. This recommendation requirestechnical solutions that take into account thespecial characteristics of the cooperativemodel. Donors should provide assistance withimproving the definition of the allocation ofresponsibilities among elected officers and tech-nical personnel. This can be done, for example,by drafting terms of reference for the entire staffand through awareness sessions devoted to thevarious roles. Donors also can support the tech-nical training of elected officers and technicalspecialists through networks. Finally, emphasisneeds to be placed on the importance of gener-ating greater revenue to compensate personnelneeded for proper functioning, a question that islinked to the recommendations on cost controland productivity. This enhanced professional-ism also can be supported by donors by group-ing cooperative institutions, creating points ofservice, and strengthening apex institutions.

Contribute to the strengthening of humanresources. Enhancing human resources inMadagascar is an issue that extends substan-tially beyond microfinance and has long-termimplications. Donors can nevertheless helpMFIs acquire and maintain staff they require, by(i) financing activities to enhance the awarenessof microfinance of Malagasy students and (ii)financing technical assistance relating to thedevelopment of human resources for MFIs.Such assistance could address improvingrecruitment methods, introducing career andtraining plans for employees, developing incen-tive systems, and creating other mechanisms toincrease staff motivation and loyalty.

2. Help MFIs better adapt their services.

To improve the linkage between supply anddemand, donors can help MFIs improve theanalysis of market needs:

Finance market research on demand to betterassess clients. Although there are manyresearch and evaluation tools already available(see www.lamicrofinance.org for resources inFrench, or www.microfinancegateway.org forresources in English),9 donors can finance


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__________________________9 Resources can be identified by searching on product devel-opment and market research.

research as well. Such studies could be devotedto (i) the client base and its needs; (ii) clientsatisfaction; (iii) factors behind abandoningefforts; and (iv) the organization of test groupsto obtain more hands-on knowledge of themarket and how it reacts.

Support the development of new servicesand/or distribution methods. Donors couldfinance pilot testing of new products and/ormarkets. This kind of support could take theform of a fund accessible by all MFIs based onthe model of the capacity-building fund referredto below (see meso-level recommendations).

Disseminate the knowledge and know-howalready gained in Madagascar and elsewhere.Donors could support the establishment of adatabase that includes local and internationalexperiences. There are several financial toolsand products tailored to rural people alreadyavailable in Madagascar, and they could bedisseminated more widely (e.g., equipmentlease with option to purchase).

3. Promote diversification of institutionsand approaches.

There is still scope in Madagascar for othermethodologies and institutions, especiallyregarding the supply of credit. To meet thischallenge, donors will have to:

Continue enhancing banks’ awareness ofmicrofinance. In collaboration with theProfessional Banking Association, donors canfinance a discussion panel that would enableMalagasy bankers to meet bankers involved inmicrofinance (e.g., Sogesol in Haiti andBancosol in Bolivia). Donors might alsosupport the direct activities of banks involvedin the sector (in Madagascar, the BOA) anddisseminate good microfinance practice infor-mation to all banks.10

Study the establishment of new institutions andpartnerships. Through their work in manydifferent countries, donors have gained familiaritywith various types of institutions that are

capable of functioning on a large scale. Asindicated by a recent study carried out inMadagascar, a local microfinance bank couldmake it possible to cover certain marketsegments. It would be beneficial for a donorconsortium to consider establishing such aninstitution (its charter, shareholders, products,etc.). In addition to creating new institutions,donors could also promote ties between MFIsand various types of commercial stakeholders,such as wholesalers of agricultural equipmentand inputs, merchants, etc., that can provide serv-ices in support of MFIs (e.g., an MFI might use amerchant to open a teller window on market day).

Finance a supplementary study on the poten-tial role in microfinance of Caisse d’Epargneand the postal system. Such studies have beenconducted previously, but they need to beupdated and supplemented. If the findings indi-cate these institutions have an important role toplay, donors could then participate in the searchfor technical partners, or in the development ofthese institutions’ microfinance activities.

Subsidize extension of the network of well-performing MFIs. Donors could subsidize theexpansion of MFIs according to strict criteria:(i) existence of a business plan that includesexpansion-related projections; (ii) achievementof financial and institutional sustainability, asmeasured by critical international indicators; and(iii) financial contribution to the expansion bythe MFI. This subsidy could be used to financephysical infrastructure (branches, teller windows,commercial partnerships), new technologies, or aportion of operating costs for the short term.

MESO

MFIs need support services, such as training,auditing, or private refinancing. The teamobserved the weakness of this portion of themarket, which began to develop only recently.The fragility found at the meso level thus risksbroadening, or perpetuating, fragility at the leveldescribed above.

Meso-level strengths

Start of microfinance refinancing by the bank-ing sector in Madagascar. The participation oflocal banks helps promote the sustainability of

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__________________________10 Resources can be identified by searching on productdevelSee the recent CGAP Focus Note on the variousmodels of successful commercial bank involvement inmicrofinance, at www.cgap.org/docs/FocusNote_28.pdf.

MFIs, their expansion, and their integration intothe national financial system. While donorshave a role to play when it comes to priming thepump, it is the local financial markets them-selves that must carry out the task. Institutionslike CECAM, OTIV, Lac Alaotra, ADEFI, orAECA are partially refinanced by BOA, BNI,or BFV. These institutions’ outstanding creditto MFIs represents MGA 4 billion–6 billion—about 15 percent of outstanding MFI loans toclients. This is a sizable share, and it is tendingto increase.

Existence of professional associations. MFIsare grouped within two professional associa-tions: APIFM for cooperative institutions andAIM for nonmutual MFIs. These associationsare financed primarily by their members,although APIFM has received assistance fromdonors on individual issues. The new law onmicrofinance requires a microfinance associa-tion to have ties to the Professional BankingAssociation, constituting another step towardintegrating microfinance into the formalfinancial sector. These associations have playedan important role in enhancing professionalismand protecting their members’ interests in thepast and will be called on to continue to do so.They have solid ties with their counterpartorganizations abroad, as illustrated by the factthat the annual meeting of the AfricaMicrofinance Network (AFMIN) was just heldin Madagascar.

Initial supply of specialized training. MFIsalready have a training base in microfinance,finance, and accounting available inMadagascar and abroad. It includes, forexample, “training of trainers” modules(CGAP/CAPAF), operational and financialtraining modules (seven courses fromCGAP/CAPAF with APIFM), “training fortechnical specialists and elected officers” byAGEPMF (risk management, institutional man-agement, etc.), and the “INSCAE master’s”(Master’s in Cooperative Financial Institutionsand Banking). Other training is offered by theBanking Technical Institute (National Centerfor Banking Training) and is available abroad,for example at CEFEB (AFD’s training centerin Marseilles).

Interest shown in microfinance by audit firmsand consultants. The most important firms(those affiliated with international firms) areinvolved in MFI audits. Several firms havereceived CGAP/CAPAF training on thespecifics of microfinance, and some have goneso far as to establish special units for micro-finance activities. The fact that MFIs haveaccess to audits on a regular basis enablesthem to have audited financial statements. Thisbenefits sound management and transparencyand eases access to commercial refinancingor participation in their capital by national orinternational investors.

Meso-level weaknesses

1. Fragility of services provided to MFIs

The services provided to MFIs are still ratherscant and depend on outside elements thatjeopardize their sustainability.

Inadequate number of skilled national serviceproviders. The small size of the Malagasymarket and the lack of trained personnel explainthe gap between the supply of and demand fornational consultants and service providers. Thesupply is inadequate for several different typesof services, including internal control, manage-ment consulting (business plans, for example),MIS, and accounting.

Problems with accessing training. The lackof MFI access to training can be attributed toseveral factors. First, existing training is poorlypromoted and coordinated. There is no central-ized information on training, making it isdifficult to determine who is offering what.Consequently, training sessions are sometimesoffered at the same time and topics sometimesoverlap. Training can be relatively unpre-dictable given that it often depends on outsideparticipation.

Finally, training is excessively centralized inAntananarivo. There is genuine demand fortraining that is more readily accessible byMFIs established in remote areas. Attempts toaddress this issue are currently being made. Forexample, AGEPMF has begun to offer trainingin Diego and Fianarantsoa.


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Risk of unfair competition in training andother technical support areas. Subsidies fromdonor projects sometimes compete withservices offered by the private sector. Unfaircompetition jeopardizes the viability of a privateservices sector, which is still fragile, thusboosting the fear of a rupture in unsubsidizedsupport services.

Limited transfers of skills. There is a lack ofskills transfers under the technical assistancefrom abroad. Training missions follow one afterthe other without the training really being incor-porated into MFIs operations. References aresometimes made to the sustainability of serviceproviders rather than that of the MFIs.Nonetheless, it is possible that the MFIs do notalways do everything they can to view trainingas an ongoing and essential investment in theirsustainability.

Uneven audit quality and perception of highcosts. Despite the interest shown in micro-finance by audit firms, a majority of them havelittle training in the special characteristics ofmicrofinance, and audit quality is considereduneven. Some auditors fail to adopt an adequateapproach (for example, the loan portfolio auditmay be insufficient) and do not probe deeplyenough, either because of a lack of financialmotivation to do so or because of a lack ofknowledge. The findings do not always enablestakeholders (banks, donors, potential investors,and the MFIs themselves) to gain a clear visionof the financial health of MFIs, especially with-out an in-depth portfolio analysis. Moreover,MFIs consider the service to be costly despitethe fact that the firms often offer a 25 percentrebate from the normal rate, while in turn theaudit firms do not yet consider this activity to beprofitable.

2. Current limitations of the professionalassociations

Limited clout and visibility. The professionalassociations appear to lack sufficient clout todefend the interests of the profession.Conversely, the advantages of microfinance andthe way it functions are not widely known bythe authorities, donors, the public, or sometimesand even the MFIs themselves. This lack of

familiarity may harm the development of micro-finance (e.g., through the belief that microcreditis at usurious rates, subsidizing purchase ofinputs, or interest rates).

Lack of technical representation at APIFM.The cooperative institutions are representedin their professional association by electedofficers only. The lack of technical specialistslimits the potential for technical exchanges ofviews and leveraging experiences, even thoughthis is one of the main roles of a professionalassociation.

3. Unavailability and unreliability ofinformation

Lack of comprehensive, standardized, andregular statistics. Statistics on MFIs and theiractivities available from CSBF, the professionalassociations, CNMF, and some projects arepartial and not cross-comparable. For example,to prepare the statistics for this report, the teamhad to reconcile divergent data from APIFM,AIM, and AGEPMF.

Lack of client information sharing. The lackof information on clients and their financialbehavior engenders costs and risks for MFIs. Inthe absence of a credit information bureau,MFIs make decisions without complete infor-mation on the histories of their clients, therebyincreasing the risk of default and the risk thatclients are borrowing from several MFIs at thesame time. However, there are the beginnings ofinformation sharing about delinquent payersunder the auspices of APIFM. Furthermore,CSBF, with support from FIRST and MCA, isconducting a study on the feasibility options fora credit information bureau.

Meso-level donor recommendations

1. Improve investment in training.

The training system is still fragile, in terms ofstructure and availability. Donors must there-fore continue to buttress MFIs with trainingactivities, but adopt as a priority the transfer ofskills—an essential prerequisite for sustainability.

Finance a descriptive inventory of training.There is a sizable supply of available training

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(public and private, Malagasy and international).Donors should finance a study on existingtraining that would gather information on avail-ability, costs, terms of use, assessments,sources of financing, and quality. The conclu-sions of the recent APIFM study taking stock ofMFI training needs in Madagascar could bematched against the inventory to show the gapbetween training supply and demand. The studyshould be widely disseminated among MFIs,donors, and any other potential participants(ministries, banks, etc.). The association couldsubsequently update the information if it sodesired.

Streamline and coordinate the financing oftraining. Generally speaking, it is preferable tosubsidize training from the demand side.Regarding subsidizing training from the supplyside, donors should make their financingcontingent on several criteria, such as:

l Require training to be open to all MFIs thatmeet a minimum set of criteria (size, trans-parency, etc.). Offering training to eachMFI individually is far too costly and doesnot always succeed in strengthening themarket.

l Promote cofinancing, to ensure clients aremotivated. To achieve financial sustain-ability, donors’ subsidies will have todecline over time and ultimately give wayto financing assumed by the client in itsentirety.

l Ensure information on the training organi-zation is widely disseminated (using the listdrawn up with the CLEAR and the onefrom the APIFM inventory, for example).

l Avoid duplicating training programs,especially when they are available in theprivate sector.

Make skills transfer sustainable. To encouragethe transfer of skills, donors could financecapacity building for national trainings byfacilitating “training of trainers” programs,offering “coaching” with international trainers,and preparing and disseminating instructionalmaterials, with particular attention to internaltraining.

2. Establish multidonor funds that arefreely accessible for technical support.

It is essential to create a technical and financialtool base that is accessible to MFIs outside ofprojects when they have specific needs.

Donors could pool resources available for MFIswhen they apply. This fund could, for example,finance scholarships for technical support,audits, MIS, the introduction of a computersystem, studies on the implementation of insti-tutional transformation, the development ofbusiness plans and action plans, and so forth.This type of multidonor fund already exists inother countries (for example, in Tanzania whereit has been created through a DFID initiative). Itrequires a manager who centralizes resourcesand transparently performs the following tasks:

l Defines the minimum eligibility criteria forMFIs that will receive financing from thefund, for example the size of the institutionor the regularity of the information submit-ted to CSBF and APIFM;

l Launches requests for proposals andresponds to ad hoc requests;

l Defines the selection criteria for proposalsand for the use of funds;

l Evaluates applications; and l Monitors the approved funding.

To ensure system sustainability, eligible insti-tutions will have to cofinance the effort coveredby the applications. The partial and decliningsubsidization makes it possible to graduallyintegrate training costs into the MFI balancesheets.

3. Promote MFI transparency.

Transparency is essential for all aspects of insti-tutions’ lives—not only for the management andsupervisory authority, but also for the protectionof savers or the search for investors. To ensureMFI transparency, donors should help do thefollowing:

Disseminate standards on good practice forfinancial disclosure. Donors could finance aseminar on these standards to enhance theawareness of MFIs and encourage them to move


15

toward harmonization of the indicators used.11

To provide MFIs an incentive to adopt and usethese standards, donors, in cooperation withCSBF, could jointly establish a Certificate ofQuality Financial Disclosure based on theCGAP Transparency Award. To bring togetherthe DSF databases, donors could providesupport to CSBF becoming the depositary ofan accessible and consistent database on MFIfinancial information. The professional associa-tion could work closely with CSBF to bringtogether and cross-check data provided byMFIs.

Disseminate the existing information on MIS.To avoid creating MIS from scratch, donorsshould ensure that information is disseminatedon existing MIS and the terms for using them(by using the resource center on informationsystems at www.microfinancegateway.org). Tohelp MFIs understand their needs, donors couldsteer them toward CGAP’s IS Fund or turn tothe multidonor fund mentioned previously.12

Cofinance MFI audits digressively. Becausefew Malagasy MFIs are sustainable, subsidizingaudit costs may be justified. This subsidy shouldbe associated with digressive cofinancing. Inall cases, donors should avoid making directpayment for the audits, so that the institutionswill become accustomed to paying for theirown audits while including the projected costsin their financial plans.

Follow up on the study on the creditinformation bureau and reach agreement onthe response. Donors should work with CSBFto analyze the findings on the feasibility of acredit information bureau. Two options may beconsidered: expanding the banking risk bureau,or creating a credit information bureau from theground up. Once a decision is made, donorsspecialized in this area ( e.g., the World Bank)could provide the necessary support (e.g.,structuring the credit information bureau andproviding support in technology and in trainingbureau and MFI staff).

4. Encourage and support the merger of thetwo professional associations.

Donors should support the creation of a newprofessional association as proposed in the draftlaw on microfinance. Merging APIFM and AIMwill allow a sizable number of stakeholdersto speak with one voice and exercise greaterinfluence in the economic, social, and politicalsphere. Donors should encourage cooperativeinstitutions to include technical specialists intheir representation, because these specialistshave more comprehensive knowledge of micro-finance than the elected officers and could helpdefine the association’s priorities. Integratingbanks that serve poor people into the profession-al association would strengthen the insertion ofmicrofinance into the formal financial system.

l Donor support for the new associationcould take the following forms:

l Preparation of the strategic plan of theassociation.

l Development of member services.l Strengthening of advocacy activities: One

priority would be training in lobbying andcommunication and the training of membersin the international principles of micro-finance. Specifically, donors could financeand train the elected officers of cooperativeinstitutions in sound microfinance policiesand conduct pinpoint communicationscampaigns.

5. Promote a sustainable refinancing sys-tem for MFIs.

Donor financing could have a leverage effect togive MFIs access to the capital market. Thistype of support does not require large subsidies,but does call for in-depth understanding offinancial tools and markets. Donors with suchknowledge (e.g., IFC, the AFD, and USAID)could do the following:

l Continue to put MFIs in touch with banks,and private investors and then give themsample contracts to help them prepare fornegotiations.

l Establish guarantee funds. This oftencontroversial tool will have to be handledprudently and professionally, stressing the

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__________________________11 See the Disclosure Guidelines at www.cgap.org/docs/Guideline_disclosure.pdf andwww.cgap.org/docs/Guideline_definitions.pdf.12 www.microfinancegateway.org/resource_centers/technology.

leverage effect, sharing risks, and avoidingpotential adverse effects (e.g., negligence inmonitoring repayments).

l Help MFIs identify sources of financing inlocal currency, from local or internationalinstitutions, to protect MFIs againstexchange rate fluctuations.

l Encourage MFI access to financial ratingsand to the training and subsidies of theRating Fund (www.ratingfund.org) or to themultidonor fund to finance these activities.A rating report brings transparency andconstitutes a critical tool for gaining accessto private capital from investors and banks.

MACRO

Although it is promising, the policy frameworkfor microfinance is relatively new and fragile.There are still several challenges to be met inthe area of supervision, in understanding goodpractices, and in the conditions necessary forestablishing an environment conducive to thedevelopment of sustainable institutions.

Macro-level strengths

Positive change in the general environment.Improvements in Madagascar’s overalldevelopment climate are helping to develop thefinancial sector. Progress in critical infra-structure, such as roads and telecommunicationsin particular, is reducing transaction costs forMFIs and their clients. It is not unusual for MFIsto begin operations in a new area once a road iscompleted.13 Another area of progress is theNational Land Tenure Program, which willmake it possible to secure land tenure andhence production, investment, and the provisionof guarantees. Donors are already making asubstantial contribution to these efforts. Forexample, the European Commission is sup-porting telecoms and roads, and the AFD issupporting the National Land Tenure Program.The strengths of the financial sector are asfollows:

National Microfinance Strategy consistentwith good practices. The national strategystatement of aims repeats all 11 key principlesof microfinance.14 These principles weredisseminated during the participatory draftingprocess. The strong involvement of key donors(especially the UNDP) and the government’scommitment in this process of drafting thenational strategy are positive factors. Thestrategy clearly establishes the exclusive role ofthe private sector in the implementation ofmicrocredit. Its Steering Committee (CP–SNMF) is inclusive, with representation fromthe professional associations, donors, and thegovernment.

Proper assignment of microfinance to MEFB.While recognizing that microfinance haspositive effects in several development areas(e.g., education, health, rural development,etc.), the policy responsibility of MEFB stressesthat microfinance is part of the financial system.The National Coordinating Office for Micro-finance has thus been in MEFB since 2004.

Existence of a specialized microfinance unitwithin CSBF. Recognizing the importance andspecific nature of microfinance, CSFB created aspecialized unit devoted to crafting the new law,studying the establishment of the credit infor-mation bureau, and having sole responsibilityfor supervising MFIs.

Inclusive draft law. The recently approvedmicrofinance law accords priority to an activityrather than to a particular institutional status andallows for better matching of stakeholders withthe market. It opens the door to all cooperativeand nonmutual institution stakeholders and tonew stakeholders, such as joint stock compa-nies. Donors, particularly the World Bank, weredeeply involved alongside CSBF in preparingthis draft law.

Macro-level weaknesses

Fragilities of the general environment. Despiteprogress made in key infrastructure, the macro-economic situation remains unstable. This hasdirect implications for microfinance and the


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__________________________13 Many regions could benefit from this policy of relievingisolation, which will make it possible to interconnectisolated areas and connect them to the capital (this is trueof the Sofia region, for example).

__________________________14 www.cgap.org/docs/KeyPrincMicrofinance_CG_eng.pdf

financial sector in general through the increasein the banks’ leading rates and competition withTreasury bills. MFIs will sometimes invest inBTAs rather than extend credit, while inflationincreases MFIs’ operating costs. Finally, thedevaluation of the ariary exceeding 30 percentin 2004 and 2005 had a negative impact on therepayment of MFI loans contracted in foreignexchange and on the purchase of importedgoods necessary for activity (e.g., vehicles,information technology, etc.).

The structural fragility of agriculture is anotherproblem with direct consequences for all micro-finance stakeholders. Increasing agriculturaloutput and productivity requires many differentinterventions. Financial investments are essen-tial, but improvements in agricultural infra-structures and techniques, resolution of theland tenure problem, the organization of therural world, and the processing, distribution, andmarketing of agricultural products are alsoimportant to enhancing the productivity ofMalagasy agriculture. However, there is a lackof cohesiveness, to which donors contribute, inagriculture financing policy: the need to increaseoutput rapidly exerts pressure on MFIs to lendregardless of the risks and their lack of internalcapacity. The need to act rapidly is often used tojustify recourse to sub-standard microfinancepractices, ultimately jeopardizing the sustain-ability of MFIs without doing anything toresolve the agriculture problem. By makingMFIs more vulnerable, these measures mayslow access to financial services by the poor.

Risk of market distortions from subsidies. Withall the best intentions, donors use credit—sometimes by encouraging the subsidization ofinterest rates—out of a sense of urgency andbecause it seems simple to do so. They call onMFIs and their networks to channel fundsdirectly to the people, in particular to increaseagricultural production. Financial services thenbecome tools for distributing subsidies.Unfortunately, the consequences of such opera-tions are not always as positive as expected.Other more direct measures to boost productioncould have better outcomes (e.g., productiontechniques, improved seed, irrigation, pricesupports, etc.). Subsidized rates pose many risksfor the Malagasy financial sector, because it

makes both the demand for and supply ofcredit in rural areas more fragile and also risksincreasing inflation. (See the box below foradditional details.)

Supervision by CSBF remains weak. The super-visory body is in place, but the team specializedin microfinance is still relatively small andresources are scarce. One consequence of thissituation is that the process for examining andissuing licenses is time consuming. The law onmicrofinance has been approved, but the imple-menting decrees have yet to be issued. Some ofthe prudential rules and their application alsomust be brought in line with internationalstandards. For example, several MFIs monitortheir PAR only at the 90-day mark, which is toolong to effectively assess the risk of short-termproducts, such as microcredits.

Questions about the involvement and role ofMAEP in the financial sector. Donors areurging MAEP to play a role in providing finan-cial services in rural areas, even though respon-sibility for microfinance is vested in MEFB.The financing of multisectoral projects throughMAEP, though it is becoming less frequent,illustrates this practice. A June 2003 study onrural finance15 opens the door for MAEPinvolvement, even though the 2004 five-yearplan for rural development does not mention it.

Ineffective legal system. The team was told ofmany instances of criminal activities (embezzle-ment) that went lightly punished or not punishedat all. The slowness of court proceedings andtheir high costs (fees for mortgages), particu-larly regarding collateral collection, underminesthe financial equilibrium of MFIs. More gener-ally, the widespread absence of valid ownershipdeeds and other real guarantees poses a genuineobstacle to microfinance development.

Macro-level donor recommendations

Many donor interventions in areas other than thefinancial sector have a beneficial impact onmicrofinance. This is particularly applicable to

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__________________________15 “Quelle politique de financement de l’agriculture?” [Whatis the best agricultural financing policy?], Directorate forEnhancing the Professionalism of Producers, Rural FinanceSupport Service.

infrastructure investments (e.g., roads, commu-nications, and electricity).16 Specifically, donorscan do the following:

1. Help the government maintain a favorableenvironment.

Support the government’s efforts to maintainmacroeconomic stability. The best way fordonors to contribute to microfinance at themacro level is to help the government ensuremacroeconomic stability. In cooperation withthe IMF, donors can finance focused studiesillustrating the linkage between economicstability and the development of the financialsector (including microfinance), perhapsmaking use of the results of the analysis ofMFI costs and revenue streams. These studiescould show the impact of inflation on MFIsand analyze the implications of a high Treasurybill rate on operations and on the supply ofcredit.

Support the reform of the legal system. Thereform of the land tenure and legal systemcalls for long-term investments by donors. Inaddition to providing ongoing support forthis reform, donors should devote particularattention to current issues, such as the prelimi-nary draft law on guarantees with respect tocollateral security and pledging or the NationalLand Tenure Plan.

Contribute to analysis of the tax system for thefinancial sector. Current law provides forsizable tax exemptions for cooperative MFIs17

that are subject to review under the new draft

law on cooperative and nonmutual institutions.If MEFB wishes to keep the exemptions inplace, donors could help the government estab-lish an equitable system adhering to principlessuch as (i) providing exemptions linked to activ-ities rather than the status of MFIs; (ii) makingexemptions transparent; (iii) ensuring exemp-tions are limited in time and declining; and (iv)clearly indicating that they are incentives. Thissystem should guard against use by organiza-tions that try to benefit from exemptions withoutproviding microfinance services.18

2. Beware of subsidized rates.

Study and explain the risks of subsidization.Interest rate rebates, as practiced in Madagascar,are similar to providing an interest rate subsidyto microfinance. It would be worthwhile toexamine the results of the tests conducted inMadagascar and to share the lessons learned.The subsidization of client interest rates, evenon a temporary basis, has been studied inseveral countries. Despite its attractiveness atfirst glance, this practice has often narrowedthe microfinance market rather than broadenedit, with an undesirable impact on povertyreduction.

Even though many wealthy countries (includ-ing France) have used or currently use interestrate subsidies to finance agriculture, the reviewteam has found no examples of successesassociated with such practices in developingcountries. It is unlikely that the experience ofwealthy countries in this area can be used as amodel given the economic disparities involved.Donors should be the first to evaluate the risksof credit subsidization if they seek to advocategood practices vis-à-vis the government andMFIs.

More specifically, interest rate subsidizationposes the following risks:

l The risk of confusion between credit andsubsidy, leading to the likely increase inloan defaults, in particular as from thesecond cycle


19

__________________________16 One example is the Lax Alaotra region—one ofMadagascar’s “rice granaries” near Antananarivo, wheretwo MFIs operate (OTIV and CECAM)—which hasextremely poor connections to the capital city. In the dryseason, when transport is the most favorable, it still takesthree days by road from the Diana OTIV to Antananarivo.Within the regional networks, some offices are difficult toreach, as in the case of CECAM movement throughoutBongolava, Menabé, and Sofia, where that network hasestablished regional unions that are extremely difficult tomonitor.17 Declining exemption from the business profits tax (IBS),featuring full exemption for five years followed byreductions (for years 5 through 10), exemptions from theprofessional tax, exemption from the VAT on interestcharged on member deposits and loans, and exemptionsfrom taxes and registration fees on asset components relatedto operation (see Chapter IV of the law on tax provisions).

__________________________18 See page 14 of the “Guiding Principles on Regulation andSupervision of Microfinance,” available at www.cgap.org/docs/Guideline_RegSup.pdf.

l Problems with returning to applying marketterms once the subsidy period has ended

l A higher risk customer base attracted by thesubsidized rates

l Unfair competition with MFIs opting to usea real market rate

While the recovery of operating costs and finan-cial costs needs to be included in the interest

rate, MFIs must increase their productivity andefficiency to improve their cost controls tobenefit their clients. Instead of subsidizinginterest rates, donors should subsidize thetransformation of MFIs into more effectiveinstitutions, with more diversified services tobetter serve the rural population. They shouldalso improve the dissemination of informationon interest rates that are intended to cover MFIcosts and expansion (see the box below).

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Box 4. Subsidized Rates in Madagascar (“Bonification”)

How the mechanism works

The current agricultural investment credit system is subsidized as follows:

l MFIs that so request can offer their clients loans at subsidized rates (1 percent a month instead of thenormal 3 percent).

l The subsidy is applied at the end of the loan and is subject to timely repayment and the proven increase inthe profitability of the activity.

l The state—sometimes with donor subsidies—pays the difference to the client’s account. For the MFI, theoperation is transparent, because it collects the customary 3 percent interest.

l Supply is limited over time and intended solely to jump-start the financing of rural investment (e.g., theconstruction of village-level granaries or agricultural equipment).

Advantages

l Resource transfers to the rural sector

l Subsidization subject to a satisfactory payment history and improved productivity

l No short-term revenue loss for MFIs

l Limited cost to the state, because the offer is temporary (one year)

Drawbacks

l The rebate stemming from the subsidized rate (2 percent on the total loan cost) is negligible in comparisonwith farmers’ total production costs and does nothing to address the fundamental problems of agriculturalproduction.

l While cost is relatively easy to calculate, benefits are difficult to quantify (initial findings show little evidenceof agricultural product growth).

l Clients forget the true cost of credit (even when informed of the exceptional nature of the subsidy). Howwill clients react when real rates resume?

l To the extent that the money is fungible, a portion of the loans is probably used for purposes other thanproduction (“windfall effect”).

l MFIs that are not or refuse to be subsidized are at a disadvantage when competing with cut-rate prices.

l There is little likelihood productivity will improve solely because of subsidization for such a short period.

l Institutions that offer credit at market rates but are competing with artificial prices may be penalized.

l There is a risk of inappropriate use of subsidies as “gifts,” which may induce favoritism for some clients.

See the annex for some examples of the negative effects of subsidized rates.

Subsidization is contrary to SNMF

l The principles defined by SNMF (Chapter 5.2) and adopted by all Malagasy stakeholders are underminedby subsidies. In particular, the government’s direct involvement in the loan and rate subsidy runs counterto principles of good practice.

3. Clarify the roles of the variousstakeholders.

Donors must ensure that the programs theyfinance have a market orientation and distin-guish between the roles of the private andpublic sectors. To this end, they could do thefollowing:

Finance a seminar on the public sector’s rolein microfinance. Donors could follow theexample of existing training modules on therole of government in microfinance19 to reaffirmthe respective roles of the private sector(operational) and public sector (environmentand regulation). This seminar could be used todisseminate the concepts already set forth in thecontext of SNMF.

Ensure that MEFB plays its proper role as thesole ministry in charge of microfinance.Donors should encourage the government toconfirm MEFB’s exclusive role in programdesign and day-to-day management. All micro-finance activity, even when its components arepart of programs managed by MAEP, should besupervised by MEFB. Moreover, donors shouldensure that projects that include a financialcomponent, whether in the urban, agricultural,or rural environment, incorporate the goodpractices of SNMF. Given the large number ofcoordination bodies20 involved in microfinance,donors should focus their support on CNMFwithin MEFB.

Promote the National Coordinating Office asfacilitator. Donors should help the NationalCoordinating Office establish the primacy of itsresponsibilities, such as adequate coordinationand the dissemination of good practices, by

working closely with the steering committee asa whole vis-à-vis the government’s decision-making entities, such as the National Assemblyand the Senate, the Office of the President, etc.This facilitator role will also enable the privatesector to offer financial and support services toMFIs, and CSBF to fully play its supervisoryand regulatory role.

4. Build the capacity of CSBF.

Help establish an efficient supervisory organi-zation. Donors should help CSBF improve theorganization of its services, for example regard-ing issuing and examining licenses, centralizingdata, training inspectors, and coordinating withthe internal control personnel of MFIs and withaudit firms. This could involve training, but alsoequipment, technical support, and so forth.

Support CSBF’s human resources. CSBFneeds to have an adequate number of trainedstaff to guarantee efficient supervision of MFIs,whose fragility is already evident, especiallyregarding governance. In particular, there is aneed for a team of inspectors that can have apresence in the field. Donors could second anexpert to CSBF to this end.

Support the drafting and dissemination ofdecrees and instructions on the new law. Thisurgent task requires focused technical supportfrom donors. With the support of the WorldBank, for example, CSBF could continue to takestock of worldwide experience and apply thelessons learned to the situation locally. Donorsshould encourage the government to adopt therelevant decrees and instructions promptly toavoid a legal vacuum.


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__________________________19 Presentation No. 18 atwww.cgap.org/direct/resources/presentations.php. 20 SNMF Steering Committee, National CoordinatingOffice, MAEP financial group, Rural Credit SupportActivities Coordinating Office, Producer ProfessionalismSupport Directorate, and Central Rural Finance Subgroup.

IV DONOR SYSTEMS

Analysis of the strengths and weaknesses atthe micro, meso, and macro levels identifiesspecific recommendations for donor actions ateach level of the financial system. Donors them-selves have strengths and weaknesses in theiroperating systems that have an impact on theircapacity to address the challenges highlighted inthe preceding section.

For 1€ = 1.3 US$As well as other smaller donors (details in the annex).

Donor System Strengths

1. Solid capacity for collaborative actionand mobilization

Commitment to the national strategy. Donorscollaborated in SNMF and have adopted it.Donors are active participants in the steeringcommittee, which also includes the privatesector and the government (AFD, UNDP, SwissCooperation, with USAID, the World Bank, andthe EU as alternates), and also take part in theround tables organized by the committee on aregular basis.

Cooperation on joint financing. Donor coordi-nation goes well beyond meetings and strategyagreements. For example, there is parallelEuropean Commission financing for CECAM,

ILO/BMZ financing for the APIFM, MicrostartUNDP/AGEPMF financing for TIAVO and theOTIVs, and AFD, EC and UNDP (Microstart)financing for Vola Mahasoa. This kind ofcooperation is frequently the best way fordonors to make the best of their comparativeadvantages, as demonstrated by the cooperationbetween AFD and EC. The sizable financingfrom EC supplements that of AFD, which hasstrong internal technical capacities both on siteand at its head office.

Cooperation on individual problems. Donorshave met to adopt a common stance on ques-tioning the RDSP program, said to competewith MFIs with direct subsidies to the people.This type of cooperation is essential if donorsare to respect a code of good practices and steerclear of contradictions between programs, as isthe case with RDSP.

2. Movement from a “project” approachtoward institution building

Donors tend to support existing MFIs ratherthan putting projects together from scratch. Inaddition, fewer and fewer projects have creditcomponents. This has a positive effect onbuilding MFIs, in that such components rarelyhave suitable technical support and hence havelow success rates.

3. Sensitivity to conditions in Madagascar

Donors are trying to understand the specialfeatures of the situation in Madagascar and aretrying to adapt their interventions to it. Withindonor structures themselves, the team notedsignificant involvement of Malagasy staff, inparticular in the representative positions.

Donor system weaknesses

1. Lack of a clear vision

Because of the lack of strategic clarity withregard to the definition of microfinance andrelated good practices, it is extremely difficultfor a development agency to adopt a cohesiveapproach to microfinance. In Madagascar,despite efforts regarding the national strategy,donor approaches have tended to diverge rather

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Donor

Disbursements2002–2004

(in millions ofUS$)

Commitments2005

(in millions ofUS$)

World Bank—IDA 1221 4

AFD 4,8 ?

IFAD 0,8 0,49

UNDP 1,2 0,8

USAID 0,15 0,1

EuropeanCommission 4,81 0,55

TOTAL 23,76 5,94

Disbursements and Commitments ofMajor Donors in Madagascar

__________________________21 Disbursements 2002–2005, not including RDSP.

than complement one another. The absence of acohesive common vision may be explained bythe factors cited below.

Uncertainties regarding donor ownership ofthe national strategy. There is no clear sensethat all donors have assimilated the guidingprinciples of the National MicrofinanceStrategy. Notwithstanding the participatorynature of the drafting process, the key messagesseem not to have been imparted and are not usedas a common starting point. Thus, although thestrategy has been adopted, donors do not appearto be working toward implementing an actionplan.

The dual approach of financial support foragricultural production and the developmentof microfinance. The lack of communicationbetween agronomists and financial specialistswithin donors partly explains this problem,discussed previously in the macro-level sectionof this report. In addition, there is a shortageof personnel with training or professionalexperience in finance and economics. Theteam identified only two individuals with eco-nomic or financial training among the donorstaff responsible for managing microfinanceprograms.

Confusion between credit and subsidization.Donors sometimes mix subsidies—which areresource transfers—with loans for clients. Theupshot is unfair competition between subsidiesand credit in the same areas, sometimes at theinitiative the same donor. For example, the teamfound that one MFI is proposing loans for inputsthat RDSP is distributing free. This confusionextends to the problem of interest rate subsidies,resulting in clients having difficulty distin-guishing between what is owed and what hasbeen given to them.

Absence of exit and backup strategies. Donorexit strategies are not always clearly defined. Asa result, some donors, such as the World Bankthrough DID in the context of OTIV support,frequently have been accused of lacking visionon disengagement. Conversely, and withnegative consequences, some other donorswithdraw prematurely (AECA) and/or on apoorly planned basis (Microstart).

2. Inappropriate selection and managementof operators

Operator selection and monitoring are essentialto ensure the sustainability of MFIs:

Absence of transparency in contract awards.Some MFIs have observed that competitivebidding procedures and requests for proposalsare not open to a sufficient number of candidatesand that there is a lack of transparency in theselection process. According to several indi-viduals interviewed, the terms of reference forbidding sometimes appear to have been draftedspecifically by and for particular candidatespreselected by donors. This practice createsvirtual monopolies, with repercussions on thequality of bids and the accountability for results.

Unpredictable use of performance-basedcontracts. Contracts are often based on a fixedperiod rather than on the results to be achieved.Contract objectives are not clearly defined (inquantitative and qualitative terms). They do notinclude incentives for achieving good results,such as improving efficiency or skills transfer.Finally, poor outcomes and failure to achieveobjectives are rarely penalized.

Insufficient insistence on skills transfer incontracts. Given the pressing need to ensure thesustainability of Malagasy MFIs, donors are notsufficiently stressing skills transfer in their con-tracts.

3. Weak knowledge management

When knowledge is properly capitalized andshared, donors can take lessons learned intoaccount when designing new programs.

Insufficient knowledge for managing practi-tioners and consultants. While many donorswork through practitioners, it is the donors whoare ultimately responsible for ensuring the qual-ity of services rendered. Management of practi-tioners requires a minimum amount of technicalknow-how and knowledge of the situation onthe ground. In Madagascar, only rarely dodonors have the internal technical capacity inmicrofinance needed to guide, orient, or takecontrol of their programs. Frequent staffturnover accentuates this problem.


23

Lack of transparency for properly measuringoutcomes. Donors rarely establish clear indica-tors for evaluating results in their contracts withtheir partners (i.e., practitioners, executingagencies, and MFIs). Key performance indica-tors not only make it possible to manage financ-ing in light of outcomes, but also permit internaland external communication on the results ofeach initiative.

4. Inadequate “loan to government”instrument for microfinance

The financing instruments for microfinance aresimilar to the instruments needed for thefinancing of the private sector (e.g., grants intechnical assistance, guarantees, and loans).They need to be flexible, adapted to the market,and often relatively small. In Madagascar,the main instrument used by the largest multi-lateral donors (WB, EU, IFAD, and AfDB) isthe loan to the government. This raises severalconstraints:

Inappropriate cooperation with the government.Passage through the government raises aconcern because microfinance is targeted forthe private sector. Very few loans to the gov-ernment are intended exclusively for micro-finance or even the financial sector.Consequently, donors incorporate amounts formicrofinance in larger projects, as in ruraldevelopment programs, for example. This prac-tice runs the risk of giving an operational role tothe government, which is above all responsiblefor the policy, economic, and legal framework.Making ministries other than MEFB responsiblefor executing projects or credit componentsaggravates this problem.

Pressure to disburse. Donors are often pressuredby unrealistic disbursement objectives. Rapidand excessively sizable disbursement is danger-ous for the viability of MFIs and the market.When external financing exceeds absorptivecapacity, it can pollute the microfinance envi-ronment and promote unfortunate practices onthe part of clients, or even disrupt the financialmarket in the long term.

Counterproductive credit components. Donorssometimes build lines of credit into larger

projects through credit components, for examplein the rural development programs financed byAfDB, FIDA, or the World Bank. Creditcomponents pose difficulties for sustainability,to the extent that they frequently lack special-ized technical assistance or target a populationthat may not have the capacity to manage a debt.Moreover, the choice of executing agencybecomes more sensitive because the creditcomponents may then become the responsibilityof officials who have no knowledge of thefinancial sector.

Cumbersome and slow procedures that penalizeMFIs. MFIs are particularly penalized by thefailure to observe certain commitments,especially by delays in donor funds disburse-ment. One can well imagine the disastrousconsequences of delayed disbursement for anMFI that is counting on this money to pass on toits clients.

5. Challenges for donor coordination

The word “coordination” comes up often indiscussions on aid effectiveness. Coordinationrefers not to large meetings with many presenta-tions, but rather to the manner in which donorobjectives and interventions are aligned toprovide maximum support to the countryconcerned.

Limited representation of donors on the SNMFsteering committee. Donors are represented onthe steering committee by AFD, UNDP, andSwiss Cooperation. With the exception of AFD,these are not among the largest donors in termsof amounts allocated or experience in the micro-finance sector. The World Bank, the EU, andUSAID are only alternates. While this structurewas established out of a concern for easing theburden, it also creates the danger of lesserinvolvement on the part of some donors and therisk that a large donor may not be “playingalong.”

Lack of a lead donor. While the strong desire ofdonors to shift the leadership of coordinationefforts to the government is understandable, itdecreases multidonor cooperation. Donors seemmore focused on their individual problems andless disposed to seek a collective approach.

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Since the voluntary dissolution of SMB,22 thereis no longer an official forum for donors or asingle spokesperson, which weakens themessage they might convey and the timelinesswith which common solutions can be found forimproving aid efficiency and resolving theirproblems.

Donor Systems Recommendations

The fragility of Malagasy microfinance requiresprolonged intervention by donors. This supportshould be reflected not only in new programs,but also in improved management of theseprograms. To achieve this, donors have to work“differently.” As a consortium of 33 donors,CGAP is available to help its members inMadagascar implement the recommendations.

1. Ensure that staff are qualified in finance

Donors that are heavily engaged in micro-finance should have at least one staff membertrained in microfinance or finance. A minimumoption would be to train the individual withresponsibility in this area. A more sustainableand less costly solution would be for donors thatwish to remain involved to recruit and trainMalagasy personnel. This would also permitgreater capitalization and improve knowledgemanagement.

2. Apply the key principles of the nationalstrategy

Prepare a simple listing of key principles. Tomake the national strategy operational, donorsshould create a brief document that summarizesthe vision of SNMF, its key principles, and theroles of the various stakeholders.

Internalize the key principles. These principlesshould be disseminated among donors andupheld at all levels. To this end, donor staffcould be trained with field visits and periodicpresentations on technical topics. Online course

modules for donors (DIRECT)23 could be used.Donors should ensure the dissemination of theKey Principles of Microfinance summarized inSNMF (p. 35) and the Donor Guidelines onGood Practice in Microfinance recentlyendorsed by donors.24

Make donors accountable. Donors shouldestablish a system for ensuring that operationsconform with the key principles of SNMF. Sucha system might include positive incentives (e.g.,a prize for the donor who best applies goodpractices) and should also establish methodsfor admonishing donors who fail to observethem (a “red card”). This task could be assignedto a subgroup of donors that would submit itsproject for approval by the steering committeefor the national strategy.

3. Steer all interventions toward promotingsustainability.

The role of donors is to stimulate the privatesector, not to replace it. Subsidies should not bepermanent, and the way they are used shouldevolve. Experience worldwide shows that MFIscan effectively be made sustainable. Figuresfrom the MIX bear this out: In 2003, 66 of the124 MFIs registered had attained operationalself-sufficiency. To make Malagasy MFIssustainable, donors should do the following:

l Promote institutional sustainability fromthe outset through a business plan thatincludes an exit strategy and makesmanagers accountable. Donors shouldmake their financing conditional on theachievement of the stages of sustainability.

l Maximize skills transfers. Such transfersshould occur in all technical, commercial,and administrative areas, from the report toclients to the report to the financial system,and including the MIS, the accountingsystem, and human resources management.

l Give MFIs incentives to make immediateuse of market sources of financing, usingsubsidies for leverage and not as the onlyresource.


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__________________________22 Donors formed a group in 1997, with an operational armknown as the Multidonor Secretariat (SMB), that heldregular meetings and maintained a Web site. In December2003, the microfinance group of the Donor Group dissolvedand integrated the National Coordinating Office forMicrofinance (CNMF). Donors are members of the SteeringCommittee of National Microfinance Strategy (SNMF).

__________________________23 www.cgap.org/direct24 www.cgap.org/donorguidelines

4. Strengthen performance-basedmanagement with service providers.

Give preference to requests for proposals overcalls for bids. Requests for proposals define abroad objective and allow candidates to prepare aproposal more freely, whereas a call for bidstends to set rules that adhere to a contract method-ology and specific contract objectives, such as tooffer credit to a given population group. Requestsfor proposals allow greater scope for innovationand open the contract to a more diverse range ofbids. Requests for proposals also may helpprevent instances of terms of reference beingtailored specifically for certain practitioners,which restricts the market at the outset.

Allow MFIs to select their own serviceproviders. To enhance transparency and increasethe accountability of MFIs and technicalservices providers, donors could allow MFIs toenter into contracts directly with their technicalservice providers. Funds could be transferred toMFIs, which would select their technical serviceprovider from a sufficiently broad list pre-approved by the donor. To enhance MFI pre-paredness, donors could train them in selectingand drawing up contracts with providers.

5. Adapt the tools and interventions systemsto the needs of microfinance.

Subsidize good MFIs, not interest rates. Whenproperly managed, direct subsidies to institu-tions can strengthen their effectiveness andcompetitiveness. It is important to select MFIsthat have the capacity and the will to developwhile maintaining efficiency and seekingfinancial sustainability. These direct subsidiesto MFIs must be targeted, declining in amount,limited in time, and performance based. Theywill exist only as long as there is no reasonablealternative in the private sector and will alwaysentail a strategy for being replaced by loans orequity investments.

To go beyond subsidizing interest rates, whichhas negative effects for microfinance, donorscould promote a reduction in interest rates bypromoting competition and by giving MFIsincentives to reduce their operating costswhile adopting greater transparency about theirinterest rates. This said, owing to transaction

costs, the rates charged by MFIs will always behigher than the rates on “traditional” bank loans.

Use MEFB as a conduit in the event offinancing through the government. Donorswho are obliged to finance all their programs orcredit components through the governmentshould work through MEFB.

Avoid pressures to disburse. Budgets should belimited to the absorptive capacity of MFIs, thatis, their capacity to develop in a sound mannerwithout jeopardizing their sustainability. If theamounts of funding are too large, donors shouldreallocate them to other sectors.

6. Reactivate coordination.

Donors have a number of challenges to meetthat depend on them alone. For example, mostof the recommendations on donor systems donot require government participation.

Enlarge and energize the donor subgroup ofthe SNMF Steering Committee. Increaseddonor coordination could be brought about onthe basis of the donor subgroup already in placewithin the committee. It will be necessary toinclude new arrivals, such as MCA and AfDB.

Ensure that coordination is operational. Create agroup of technical specialists or direct managersof microfinance within the subgroup to focuscoordination efforts on specific issues, such as theadoption of key performance indicators or theharmonization of disclosure standards. In addi-tion, this subgroup could work in cooperationwith agricultural subgroups to discuss agriculturalfinancing. The technical specialists group couldalso work on follow-up on the CLEAR recom-mendations and discussions on subsidized rates.Because different donors have varying levels ofexpertise in microfinance, these meetings willserve as a venue for the exchange of skills. In turn,agency heads could intervene at strategicmoments in the decision-making process.

Encourage joint initiatives. Donors shouldincrease focused cooperation efforts in microfi-nance, taking successful experiences into account.For example, donors could cofinance the multi-donor fund (see the meso-level recommendation)and cofinance MFIs. This should make the mostof the comparative advantages of each donor.

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Box 5. Factors Behind Good Donor Collaboration

In the course of its experience with donor operations and collaboration, CGAP has updated the essential elementsfor ensuring success: individuals, the common interest, and instruments (the three “I”s). Donors, of course, do notoperate in a vacuum, and collaboration with the government and with practitioners is critical.

The individuals involved

l The involvement of personnel with technical skills allows for richer discussion focused on concreteinitiatives.

l There must be a critical mass of individuals committed to participating collaboratively, which is not alwayseasy for donors that have a sizable number of different projects.

l The local presence of donors is essential in order to have frequent and informal contact on site, the corecomponent of vibrant collaboration.

l The presence of decision-makers at key moments makes the collaboration functional and moreefficient.

l “Champions” on each initiative are essential for transforming hopes into realities.

A common interest in collaboration

l Clarity of the goal pursued is essential for focusing attention and ensuring the participation of all.

l The common interest must be shared, and all must be cognizant of the advantages that can stem fromcollaboration in the work of their organization.

l Prior knowledge of the subject by participants is essential, even if advance training for some may berequired.

The Instruments of collaboration

l A minimum structure is necessary for sustainable collaboration, though informal contacts continue to bevital.

l Always preserve transparency in operations, decision-making, follow-up, and ensuring stakeholderaccountability.

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ANNEX 1—SUMMARY OF FINANCIAL SYSTEM WEAKNESSES, DONOR RECOMMENDATIONS, AND ESSENTIAL PREREQUISITES

LEVEL WEAKNESSES DONOR RECOMMENDATIONSEFFECTIVE DONOR ACTION

MICRO

• Structural fragility of MFIs(governance, portfolio management, internal systems and controls, human resources, financial sustainability)

• Supply not fully meeting demand

• Help the MFIs reduce their fragility• Help the MFIs better adapt their services• Promote diversification of institutions and approaches

• Internal expertise in microfinance• Performance-based project management (contracts by

objectives, requests for proposals).• Vision of sustainability with skills transfers and exit

strategies.• Transparency in contract awards and delegation of

selection to the MFIs.• Products and financing suitably adapted (in terms of

objectives and amounts).

MESO

• Fragility of services provided to MFIs• •Current limitations of the professional

associations• •Unavailability and unreliability of

information

• Improve investment in training• Establish multidonor funds that are freely accessible

for technical support• Promote MFI transparency• Encourage and support the merger of the two

professional associations• Promote a sustainable refinancing system for MFIs

• Vision of sustainability through integration of microfinance into the financial sector.

• Subsidies directly to the private sector for support.• Flexibility in the use of products.• Capacity to share resources (pooling of tools).

MACRO

• Fragility of general environment• Risk of market distortions because of

subsidies• Supervision by the CSBF remains

weak• Questionable involvement of MAEP in

microfinance• Ineffective legal system

• Help the government maintain a favorable environment

• Beware of subsidized rates• Clarify the roles of various stakeholders• Build the capacity of the CSBF (staffing, training)

• Internalization of the key principles for good practices in the National Strategy.

• Reopening of a donors’ forum.• Better representation within the SNMF.• Active and operational cooperation between and among

donors.• Creation of a lead donor status to improve leadership

and ensure more effective lobbying.

DONORSYSTEMS

• Lack of a clear vision• Selection and management of

inappropriate operators• Inadequate knowledge management• Inadequate “loan to government”

instrument for microfinance• Challenges for donor coordination

• Ensure that staff are qualified in microfinance• Apply the key principles of good practices from the

National Strategy• Steer all interventions toward promoting sustainability• Strengthen performance-based management with

service providers• Adapt the tools and interventions systems to the

needs of microfinance• Reactivate coordination efforts

ESSENTIAL PREREQUISITES FOR

Public authorities often opt to intervene in certain markets by subsidizing or otherwise under-writing lending rates to reach a target group of poor clients or to boost agricultural output. Whilethe objectives pursued are frequently laudable, methods involving rate subsidies entail a high costfor the entities offering the subsidies, even as they have little influence on production, and theyoften lead to deterioration in the supply of long-term financial services to the targeted groups. Theexperiences below illustrate several problems that can arise because of these methods and invitethe reader to consider the high costs of subsidization in relation to its benefits.

Uganda: Subsidized government programs—the Entandikwa Credit Scheme (ECS) andthe Poverty Alleviation Programme (PAP). In Uganda, the government introduced subsidizedcredit programs focused on the rural poor. The two most developed programs (ECS and PAP)offer credit for rural investment at subsidized rates. The repayment rates range from 20 percentto 80 percent. “Subsidized credit attracts non-poor borrowers and encourages default. [It]should, therefore be […] avoided.” Source: ILO/UNHCR Technical Workshops. Seewww.ilo.org/public/english/employment/finance/workshop/execsum.htm.

Vietnam: Subsidized rates slow the development of microfinance: Microcredit subsidieshave created market distortions. These restrictions on interest rates constrain risk taking inmicrofinance and cast doubt on the viability of microfinance programs. Source: AsianDevelopment Bank, 1999, Gilberto Llanto. See www.adb.org/documents/books/central_banks_microfinance/country_studies/vietnam.pdf.

India: Integrated Rural Development Program (IRDP): In the 1980s, the Indian governmentintroduced a set of targeted subsidized financing programs, including IRDP. The latter experi-enced the three classic problems of subsidized lending mechanisms: the diversion of funds tobenefit those more well off, a low recovery rate, and the impossibility of operating without siz-able subsidies. The recovery rate on the amounts lent by IRDP ranges from 10 percent to 55percent. A 1993 study on rural finance identified widespread embezzlement of loans and a lackof awareness of repayment terms on the part of borrowers. In contrast, the main Indian MFIs(Share and BASIX) have repayment rates approaching 100 percent. The foregoing study alsofound that the total cost assumed by clients under IRDP ranged from 26 percent to 38 percentwhen transaction costs (including bribes) are considered. Other studies have shown that IRDPtends to favor rural population groups that are better-off, rather than the poorest groups.Sources: Mahajan and Ramola, “Financial Services for the Rural Poor,” World Bank,Microfinance in India; and 2002 data from MIX Market.

Thailand: Loans at preferential rates go to those who know the agricultural extension agents.The case of BAAC in Thailand shows that subsidized credit does not benefit the populationgroups for which it was intended. A 1996 study by the Thai Development Research Instituteshows that such loans instead go to producers who know the agricultural promotion agents orlending representatives. Source: GTZ, Marie Louise Haberberger.

Tunisia: In Tunisia, the Banque Tunisienne de Solidarité functions as part of a subsidizedmechanism that applies an annual interest rate of 5 percent, a level below that required to ensurecost recovery. Consequently, the bank must systematically turn to the state for subsidies to beable to survive. Sources: Interview with Michael Cracknell, CGAP Occasional Paper No. 9,September 2004.


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ANNEX 2—THE RISKS OF SUBSIDIES AND SUBSIDIZED INTEREST RATES—some examples

ANNEX 3—DONOR FUNDING ALLOCATED TO MICROFINANCE IN 2002–2004, AND

2005 COMMITMENTS

MADAGASCAR

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Estimated amounts in millions of U.S. dollars

Donor Disbursed2002–2004

Committed2005

Planned2006–2007

Projects1999–2005

AFD 4.8 1.3 13

European Commission 4.81 0.55 1.3 9.07

WB (excl. RDSP) 12 4 16.4

IFAD 0.8 0.49 1.5 2.5

UNDP 1.2 0.8 2 2.9

USAID 0.15 0.1 3

Japan 0.04 0.03

MCA 2.5 2.6 2.53

Swiss Cooperation 0.03 0.02

ILO/BMZ 1.25

GTZ 0.39

AfDB 1

Total 23.83 8.46 8.7 52.07

For 1€ = 1.3 US$


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ANNEX 4—DONOR ACTIVITIES

AREAS OF ACTIVITY AFD AfDB WB IFAD GTZ Japan MCA Switzerland UNDP EC USAID

MACRO X X X X X

MESO X X X X

MICRO X X X X X X X X X X X

Institution building X X X X X X X

Credit funding X X X

MFIs X X X X X X X

Commercial banks X

State-owned banks (CEM, postal system) X X

Savings and loan cooperatives X X X X X X X

Credit component of developmentprojects X X X X

Capital subsidies (and investmentsubsidies) X X X X X X

Subsidies for technical assistance X X X X X X X

Portfolio refinancing loans in euros X X X

Technical assistance loans in euros X

Lending to the government X X X

Capital endowments X

Bank guarantees, specifying localcurrency or foreign exchange(for MFI refinancing)

localcurrency X

Other Subordinatedlending

NGOgrants

Statesubsidy

on-lent inMFI loans

Local staff with expertise inmicrofinance (acc. to donor) 3 0 0 0 0 0 1 to 2

pending 3 3 incl.2 project 0 1

MADAGASCAR

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ANNEX 5—DONOR MICROFINANCE PORTFOLIO

In millions of U.S. dollars

(unless otherwise indicated)

AREAS OF ACTIVITY AFD AfDB ILO/BMZ WB IFAD GTZ Japan MCA Switzerland UNDP EC USAID

Microfinance budgets 1999-2005 10(euros) 1 1.25 16.4 2.5 0.3

(euros)0.03

(euros)0.036(CHF) 2.9 7

(euros) 3

Microfinance disbursements2002-2004 (microfinance +credit component of integratedprojects)

4

(euros) 1.25 12 0.8 0.03 0.030 1.2 3.7(euros)

0.15

Integrated projects with creditcomponent (completed or current) 1 4 0.0 15

(CHF) 0 .5 0.075(euros) 0.3

Microfinance commitments 2005(microfinance + credit componentof projects)

3 0.5 2.53 0.021 0.8 0.420(euros)

0.10

Later planned commitments 1.3 1.3 1.5 5 (*) 2 5(euros)

For 1€ = 1.3 US$

(*) US$32 million for the financial sector as a whole.

ANNEX 6—SUMMARY OF PROJECTS

MICRO LEVEL

Support for MFIs:

l AFD supported and continues to support 3 MFIs (€ 10 million): ADEFI Phases 1 and 2 maturingend-2006, CECAM maturing 2005/2006, Vola Mahasoa phases 1 and 2 maturing 2006.Investment and operating subsidies, Credit Fund for professionalization, autonomy building, andinstitutionalization of networks.

l EU supports or has supported several MFIs (in the amount of about € 7 million), principally theCECAM and Vola Mahasoa networks.

l WB/AGEOMF has, since 2000, supported five cooperative networks (OTIV Toamasina, LacAlaotra, Antananarivo, Diana, and the TIAVO network) in an overall program amounting to US$16.6 million.

l Japanese Cooperation helped create 4 savings and loan banks (Inter-Aides/CEFOR) in poordistricts of Antananarivo.

l MCA will be supporting the expansion and development of MFIs in five geographical areasunder a program in the amount of US$ 5 million (CECAM in particular).

l UNDP supported the Microstart program in the amount of US$ 1.61 million (credit for educationsavings of poor women to assist with its introduction in several MFIs). It worked with CIDR tohelp with the start-up of the Ambato Boeni network.

Swiss Cooperation is assisting the SAHA NGO.

l Support for credit components of Integrated Development Projects:l AfDB is supporting two programs with credit components: Young Rural Entrepreneurs (total

program of UA 7,350,000 of which UA 520,000 in credit lines) and the Project to Rehabilitatethe Bas Mangoky Perimeter (total commitments: UA 10 million of which UA 290,000 in creditcomponents) conducted with CIDR.

l IFAD is supporting three programs with credit components: Agricultural Improvement andDevelopment Project in the Northeast (PADANE, 1997–2005) entrusted to OTIV SAVA; theProject to Improve the Upper Mandrare Watershed, Phase II (PHBM 2004–2007) with ICAR;and the Program to Promote Rural Incomes (PPRR: 2005–2012).

l UNDP is supporting a microfinance component under RPPMED (poverty reduction program),which provides lines of credit to MFIs (TIAVO, Haingonala, CECAM); UNDP is supporting aJob Creation and Income Boosting Component through a credit fund in the amount of US$500,000.

l EU is supporting food security programs with NGOs, for microcredit of € 75,000 (GRET,CARE, ICCO).

l USAID is supporting a credit component of US$ 300,000 under the BAMEX program.

Support for authorized financial institutions:

l USAID has supported the Caisse d’Epargne de Madagascar (CEM). l MCA is supporting CEM.


33

Support to commercial banksl BOA is involved in direct microfinance with small farmer groups.

l AFD: proposing a guarantee fund (ARIZ) that counter guarantees banks up to 75 percent for therefinancing of MFIs (for example, CECAM by BNI).

l UNDP/UNCDF: Microfinance Support Program (MSP) supported the development of businessrelations between banks and MFIs with a UNCDF guarantee fund for the refinancing of MFIs(BOA), benefiting five MFIs in the amount of FMG 20 billion (MGA 4 billion).

Support for cooperatives and savings and loan banks

l AFD (CECAM), WB/AGEPMF (4 OTIV and TIAVO networks), FIDA (OTIV SAVA) aresupporting networks of cooperative institutions.

l CIDA/DID is supporting OTIV cooperative networks and a project to create a federation ofOTIVs.

l GTZ has supported two CECAMs and UNICECAM.

l ILO/BMZ has supported UNICECAM Antsirabe.

Commercial bank investments in MFIs

l BNI is a 15 percent shareholder in SIPEM.

l BOA, BFV, and BMOI are also SIPEM shareholders.

l BNI might invest in the central financial institution for CECAMs.

l BFV, BNI, and BMOI may be interested in investing in the capital of a new ADEFI financialinstitution.

Investors/shareholders in support of MFIs

l SIDI (international NGO) is a shareholder in SIPEM.

l GEM (Malagasy enterprise group) is a shareholder in SIPEM and APEM, and APEM supportsVola Mahasoa.

l Patrice Hoppenot (investor and partner) is a shareholder in ADEFI.

l AFD will provide quasi-capital (subordinated debt) to MFIs in the context of its microfinance“investment facility.”

l An investment company owned by Crédit Agricole France (3 CRCA Reims, La Réunion, CentreLoire) will provide capital to the central financial institution of the CECAMs.

l ICAR is investing in the central financial institution of the CECAMs and is expected to invest ina MFI in the south (PHBM program).

l QMMM (Canadian mines) has been invited to invest in the PHBM program.

l The Aga Khan group is expected to invest in private MFIs to be established (in the West andSouth of Madagascar).

l Public companies (ARO, CEM) are expected to provide capital to the central financial institutionof the CECAMs.

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MESO LEVEL

Capacity building: Training (completed or underway)

l WB (AGEPMF) is disseminating, through local and international consultants, eight majortraining modules in microfinance for local offices, supervisors, and paid technical specialists ofMFIs (microcredit demand analysis, internal audit and control, credit disputes and collection,MFI marketing/development, application of the chart of accounts, personnel management, goodgovernance, management, and administration of microfinance units). The training also applies tosenior personnel of cooperative institutions.

l APIFM disseminates seven CAPAF/CGAP course modules via local consultants: training thetrainers (basic principles of MFI accounting, quantification and control of arrears/calculation andsetting of interest rates, financial analysis, development plan and financial projections withMicrofin, management information systems, management of operating risks, and development ofnew products).

l INSCAE is proposing a master’s degree in “Cooperative Financial Institutions and Banking.”

Advocates for the sector

l Existence of two professional associations, for cooperative institutions (APIFM) and nonmutualinstitutions (AIM), that are expected to merge under the new regulations.

l ILO/BMZ has supported the creation and launch of the APIFM.

Refinancing

l Several commercial banks (BOA, BNI, BFV) are refinancing MFIs (CECAM, AECA, ADEFI,OTIV Lac Alaotra) in the amount of MGA 4 billion–6 billion.

l AFD is providing a guarantee (ARIZ guarantee fund) to commercial banks that refinance micro-finance.

l UNDP’s Microfinance Support Program provided a guarantee fund to commercial banks forrefinancing MFIs.

l EU provided a subsidy to the government, which is onlent as a concessional loan (40 year term,10 year grace period, 1 percent rate).

Accounting reform and audits

l MCA plans to support training programs in accounting and management, the creation ofmanagement centers for small entrepreneur capacity building, and to provide small entrepreneurswith access to credit.

l MPA and CGA audit firms are involved in supporting MFIs and creating an offer adapted to thiscustomer base.

l CGAP/CAPAF training of auditors.

MIS

The ORCHID firm is the national software supplier for Vola Mahasoa, SIPEM, and TIAVO (understudy).


35

Institutional rating and evaluation

l HORUS has conducted institutional evaluations (OTIV Toamasina and Lac Alaotra,Antananarivo, TIAVO) for AGEPMF.

l UNDP/UNCDF conducted the institutional audit of its four programs in 2002 with HORUS.

Other

l MCA is expected to support the improvement of payment circuits (check encashment, reform ofthe BTA system for improved access by the public).

l MCA is expected to support the creation of the credit information bureau.

l HORUS developed the strategic plan for CECAMs 2001–2005.

MACRO LEVEL

Regulation and supervision

l AFD: support to the CSBF for improving microfinance regulation in the context of theinstitutional support program for the CECAM network.

l WB: AGEPMF. Microfinance Project 3217, MAG. Legal and regulatory aspects for micro-finance (strengthening legal framework, strengthening of the CSBF’s internal supervisioncapacity).

Advice on national strategies and policies

l IFAD is supporting the strengthening of the institutions and structures implementing nationalpolicies (CNMF, APIFM, CP SNMF); budget of US$150,000 usable as needs dictate. MCAwill support SNMF implementation.

l MCA will support the financial system modernization plan (computerization of land registry)and engage in activities relating to the financial sector (total budget of US$110 million of whichUS$32 million is for the financial sector).

l UNDP will support SNMF implementation (budget of US$2 million).

MADAGASCAR

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ANNEX 7—LIST OF PERSONS CONSULTED


37

GOVERNMENT:

ORGANIZATION NAME FUNCTION E-MAIL

CSBF RATOVONDRAHONA Guy Secretary General [email protected] ANDRIANASOLO Emma Director [email protected] RAZAFINTSALAMA Yves Authorized officer [email protected] RAMANANDRAIBE Stéphane Head of Unit [email protected] of Economy,Finance, and Budget

ANDRIAMPARANYRadavidson Minister [email protected]

Ministry of Economy,Finance, and Budget RAZAKARIASA Henri Bernard Secretary General [email protected]

Ministry of Economy,Finance, and Budget RAJOELINA Francis Blaise Coordinator of

Microfinance [email protected]

Ministry of Agriculture,Livestock, and Fisheries RANDRIARIMANANA Harison Minister [email protected]

Ministry of Agriculture,Livestock, and Fisheries RATOLOJANAHARY Marius Secretary General M. [email protected]

Ministry of Agriculture,Livestock, and Fisheries RATOHIARIJAONA Suzelin

Director of Support forProducerProfessionalism

r [email protected]

Ministry of Agriculture,Livestock, and Fisheries

RASOARIMALALA Janis Saholy

Head of Unit forSupport of RuralFinance

[email protected]

Office of the President of The Republic ofMadagascar

RABESAHALA Henri Director of GoodGovernance [email protected]

Office of the Prime Minister RABEKORIANA Céline

Advisor to the PrimeMinister, Head ofGovernment (formerSec.-Gen. of APEM

Not available

DONORS AND SERVICE PROVIDERS

AfDB NADIJ Safir Future representative [email protected] BARRY Ahmadou [email protected] Khan Foundation TOUREILLE Jacques Director [email protected] Française deDéveloppement CASTAING Denis Agency Director [email protected]

Agence Française deDéveloppement DEBRA Jean Michel Deputy Agency Director [email protected]

Agence Française deDéveloppement HAYEE Emmanuel Chargé de Mission [email protected]

CIDR CHAOBEROFF Renée Research Director [email protected]

DFID VOLOLONDRAVAHY Britta Chief, MicrofinanceProject [email protected]

Embassy of Japan HIROSE Shinichi First Secretary [email protected] Union BOIDIN Jean-Claude Resident Representative [email protected] Union DE GROOT Advisor [email protected] Union RANDRIAMIHARISOA Delphin Program Officer [email protected]

GTZ RANARIVELO–KOURIEHRanda Director Kourieh.Gtz-

[email protected]

IFAD BENOIT Thierry Country portfoliomanager [email protected]

MADAGASCAR

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DONORS AND SERVICE PROVIDERS cont.


IFAD RAKOTONDRATISMA Ha Liaison officer [email protected] DAYINA Mayenga Director [email protected]

IMF DJAHDJAH Samir ResidentRepresentative [email protected]

LFS Financial SystemGmbH HAMILTON Sandra Economist—

Banking Advisor

[email protected]

LFS Financial SystemGmbH Diehl Christoph Economist, Regional

Manager for Africa Not available

LFS Financial SystemGmbH BARLEON Michael [email protected]

Millennium ChallengeAccount RALIJHON Emma Coordinator [email protected]

Norway LEHLE Hans Ssredrik Ambassador [email protected]

SCAC DE BERREChief, Service forCultural Cooperationand Action

[email protected]

SCAC MEDORI Patrick Microfinance Officer [email protected]

SCAC FRANCOIS Jean Luc Advisor [email protected]

SSC-IFC RAJAOBELINA Johane Program Director [email protected]

Swiss Cooperation MORGANTI Nicola Advisor on RuralEconomy and Finance [email protected]

UNDP BOURI Sanhouidi ResidentRepresentative [email protected]

UNDP CHITOU Mansourou Deputy ResidentRepresentative [email protected]

UNDP SABO Isiyaka Economics expert [email protected] NDIAYE Fode Regional unit [email protected]

UNDP ADEBOUCHOU MakarimiTechnical Manager,Regional Unit forCentral and West Africa

[email protected]

UNDP/MSP ANDRIAMAHENINA Mamy National expert [email protected] [email protected]

UNDP/MSP RAKOTOMAHARO Fanja Monitoring expert [email protected]

UNDP/UNCDF RAHARIVOLONA Louisette ProgramOfficer

[email protected]

USAID RABEMANANJARA Fidèle Economist [email protected]

World Bank BOND James

ResidentRepresentative,MadagascarComoros, Mauritius,and Seychelles

[email protected]

World Bank BETTENCOURT Sophia Senior OperationsOfficer [email protected]

World Bank LANSKY Tamara Senior InvestmentOfficer [email protected]

World Bank KOROTOUMOU Ouattara Public Finance Expertand Macroeconomist

[email protected]

World Bank RABARIJHON Henri Country Manager/IFC [email protected]

World Bank RAZAFINTSALAMA Ziva Rural DevelopmentExpert

[email protected]


39

SERVICE PROVIDERS AND NGOs


ADEFI RAMAROSONANDRIAMANGAZATO Director [email protected]

AGEPMF RASOLOFO Robin Secretary General [email protected] RANDRIANTSOTSY Miguel Senior banking officer [email protected]

AGEPMF RAVAOARIMINO Lova Senior assessmentofficer [email protected]

AIM ANDRIANASOLO Monique Chair [email protected] RAKOTOMANANDRAY Cécile Advisor on Microfinance [email protected] ANDRIANTAVY Hanta Secretary General [email protected]

APEM RANDRIAMAMAONJYDieudonnée Director [email protected]

APEM ANDRIANTAVY Hanta Secretary General [email protected]

APEM RAMAHOLIMIHASOMadeleine Chair [email protected]

APIFM ANDRIAMBALO Monah Secretary General [email protected] RAZAKAMAHEFA Josée 1 VPCA [email protected] RAKOTOARIVAO Andrianina [email protected] RAKOTOARISOA Tahiana Deputy Agency Director [email protected]–SG BOULIER Alain Interenterprise Director [email protected]–SG RAOELINA A. Norosoa Agency Director [email protected] HERIDE Jean Claude General Manager [email protected]

BNI–CL ANDRIAMANOHISOADamase Secretary General [email protected]

BNI–CL RANDRIANARIVELOLantonirina

Rural DevelopmentConsultant [email protected]

BOA CHUCK HEN SHUN Senior Director forMicrofinance [email protected]

CABINETMPANAZAVA

RANDRIANONIMANDIMBYOlivia Expert [email protected]

Cabinet DELTA RASOARISOA Sahondra Manager [email protected] Fivoarana RANDRIANARISOA Frederic Authorized officer [email protected] d’Epargne deMadagascar RAZAFITSIATOSIKA Calixte General Manager [email protected]

Caisse d’Epargne deMadagascar RAJERISON Dominique Deputy General

Manager [email protected]

Caisse d’Epargne deMadagascar ANDRIAMANANTSOA Claude Audit Director [email protected]

CECAM RAJAONA Thierry Central Director [email protected] RAKOTOARISOA Brillant Deputy Central Director [email protected]–Antananarivo MANANJARA Gaston Coordinator [email protected]/Vola Mahasoa RAZAKAHARIVELO Charlot Director [email protected] TREMBLAY Jacques Project Director [email protected]

DID RAKOTOARIVAOAndrianiaina

NetworkDirector dirtana.otiv@netclub

DID/LAC ALAOTRA RABOTOVAO Adèle Director ofOperations [email protected]

MADAGASCAR

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SERVICE PROVIDERS AND NGOs cont.


DID/LAC ALAOTRA GARNIER PARENT Network Director,Alaotra and Toamasina [email protected]

DID/OTIV CHARLAND Yves Program Officer [email protected]/OTIV/DIANA REAL VERONNEAU Project Director [email protected] CONSULT RANDRIANASOLO Dina Director [email protected] Fund ANDRIANAIVO Jeanine Secretary General [email protected] RAKOTONIAINA Michel Director [email protected] Bassin duMandrare Project

RAKOTONDRATSIMAAndrianiainasoa Director [email protected] or

[email protected] FRASLIN Jean Hervé General Manager [email protected]

Individual consultant ROBIARIVONYRAKOTOMANGA Josiane Microfinance Consultant [email protected]

INSCAE ARISON Victor Director [email protected] growth pole PREVOST Michel Financing Advisor [email protected]+CEFOR(NGO)

REME CEBE + ANDRIANOME Senior Officer [email protected]

INTERCECAM RAMAMPANJATORAMILIJAONA Pierre Marcel PCA [email protected]

IRAM TIAVO LEPOIVRE Emmanuel Project Director [email protected] Audit Office RASOANAIVO Martin Manager [email protected]

ORCHID SYSTEM RAJAOBELINA Mamy Manager [email protected]

PAOMA RANAIVOSOA Martial General Manager [email protected]/UNEP RATSIMBARISON Rivo Director [email protected]

SOA–IFD/AECA RAFILIPOSON Head of AECAMAROVOAY [email protected]

SOA–IFD/AECA RANDRIAMAMPIANINARobert Chair [email protected]

SOA–IFD/AECA Clément AECA MAROVOAY [email protected] Auditors,Mpanazava

RANDRIANONIMANDIMBYOliva Director [email protected] or

[email protected] Auditors,CGA RAJAONARY Mampianina Manager [email protected]

TIAVO–FIANARANTSOA RAZANAKOTO Ranaivoniasy Chair [email protected]

TIAVO–FIANARANTSOA BARITOA Ghislaine General Manager [email protected]

Trade Council RAVELOJAONA Maxime Chair [email protected] HARINIAINA Sahondra Executive Secretary [email protected]

OTHER

SIPEM RALISON Alphonse [email protected],[email protected],[email protected]

We apologize for any changes in addresses or titles which may have occurred since the CLEAR.

ANNEX 8—LIST OF DOCUMENTS CONSULTED

Adébouchou, Makarimi, and Jo Woodfin: Madagascar, Le secteur de la microfinance—Diagnosticet analyse des opportunités d’investissement (September 2003).

AFD. Antananarivo Agency. L’AFD et la microfinance [The AFD and microfinance]. March 2005.

AFD. L’intervention de l’AFD dans le secteur de la microfinance (plaquette de présentation) [AFDintervention in the microfinance sector (presentation)]. January 2004.

AIM. Institutions non mutualistes [Nonmutual institutions], SIPEM, Vola Mahasoa, APEM/PAIQ,APEM/Faratsiho, Statement as of 12/31/04 (cf: 31).

APIFM. Evolution des Activités des IMFs Mutualistes [Trends in activities of cooperative MFIs](1999–31/12/2004).

APIFM. Statistical data on MFI networks as at 12/31/2004.

APIFM with the Rating and Evaluation Fund for Microfinance. Workshop “Evaluation deperformance des IMF and notation,” May 17–19, 2005.

Bank of Africa Madagascar—Secrétariat Général—Direction déléguée aux Micro Finances:“Présentation des activités de microfinance de la Boa Madagascar” (January 2003).

Bennet, Jake, Saidja Drentje, Mark Pickens, and Carl Wydner: “Performance of mutual Guaranteeassociations in Madagascar—Findings and Recommendations.” Study prepared for UN PublicPrivate alliance for rural development (March 2005).

CGAP. Aid Effectiveness Initiative. Country Level Effectiveness and Accountability Review(CLEAR) “Clear Reviewer’s Manual,” Draft, May 2005.

CGAP. “Building Inclusive Financial Systems: CGAP Donor Guidelines on Good Practice inMicrofinance.” December 2004.

CGAP. “Key Principles of Microfinance,” available www.cgap.org.

CGAP. Scaling up Poverty reduction—case studies in Microfinance. Washington D.C., 2004(Mongolia, Bangladesh, Madagascar, Indonesia, Mexico, Kazakhstan, Kenya).

CGAP/CLEAR. Aid Effectiveness Initiative, “Using Microfinance as a test case,” Draft Terms ofReference, Country Level Effectiveness and Accountability Reviews (CLEARs). 2005.

CSBF/AGEPMF Rapport d’évaluation à mi-parcours de la première phase du programme micro-finance [Midterm assessment report on the first phase of the microfinance program], Projet CR3217, Madagascar 1999–2004, February 2004, Draft 3.

Cuevas, Carlos E., World Bank. Midterm review. Presentation on “Projet microfinance,” Crédit3217, MAG. February 2004 (Final version and recommendations).

Documentation APIFM. 2004: ADEFI, AECA, OTIV, TIAVO. Plaquette de présentation desréseaux.

Duflos, Eric, and Kathryn Imboden. “The Role of Governments in Microfinance.” CGAP DonorBrief, No. 19. Washington, D.C.: CGAP, June 2004.

Duflos, Eric, Brigit Helms, Alexia Latortue, and Hannah Siedek. “Global Results: Analysis andLessons.” CGAP Aid Effectiveness Initiative. Washington, D.C.: CGAP, April 2004.


41

Economist Intelligence Unit. “Madagascar, Country Profile 2004.” 2004.

Economist Intelligence Unit. “Madagascar, Country Report.” March 2005.

EU. Accès des ruraux aux services financiers. Analyse des options d’amélioration de l’accès desruraux aux services financiers pour favoriser l’investissement dans le secteur agricole. PohlConsulting and Associates. Munich. Rapport provisoire. February 2005.

European Community. “Stratégie de coopération et Programme Indicatif, pour la période2002–2007” and Annexes.

Flaming, Mark, Eric Duflos, Alexia Latortue, Nina Nayar, and Jimmy Roth. “Country LevelEffectiveness and Accountability Review (CLEAR): Cambodia.” Washington, D.C.: CGAP, 2005.

Fraslin, Jean-Hervé. “A cooperative agricultural financial institution CECAM providing creditadapted to farmer’s demand in Madagascar” ICAR, Case study USAID/WOCCU, Conferenceon best practices, 2004.

Helms, Brigit, and Alexia Latortue. “Elements of Donor Effectiveness in Microfinance: PolicyImplications.” CGAP Aid Effectiveness Initiative. Washington, D.C.: CGAP, April 2004.

Helms, Brigit, and Xavier Reille. “Interest Rate Ceilings and Microfinance: The Story So Far.”CGAP Occasional Paper, No. 9. Washington, D.C.: CGAP, September 2004.

HORUS. Définition de programmes et systèmes de formation en faveur des institutions de micro-finance à Madagascar [Definition of training programs and systems for MFIs in Madagascar].PMF. Final report. April 1998.

HORUS. “Evaluation conjointe des programmes et projets en appui au développement de la micro-finance à Madagascar [Joint evaluation of programs and projects in support of developingmicrofinance in Madagascar], MSP/MICROSTART/RPPMED/CIDR-UNCDF-AMBATO-BOENI,” October 2002, Final report.

HORUS. “Evaluation Finale de la Phase Pilote du Programme Microstart PNUD/FENU àMadagascar [Final evaluation of the pilot phase of the Microstart UNDP/UNCDF Program inMadagascar].” Rapport définitif. Octobre 2002.

IFC. “Republic of Madagascar Market Analysis for leasing.” Antananarivo, June 2004.

ILO (International Labour Organization). Working Paper No. 37. De Gobbi Maria Sabrina “The roleof a professional Association in Mutual Microfinance,” The Case of Madagascar, Geneva,September 2003.

Institut National des Sciences Comptables et de l’Administration des Entreprises (INSCAE), Listedes sortants de l’INSCAE travaillant dans les Banques et IFM, Liste des mémoires et projetsconcernant Banques et IFM, May 6, 2005.

Intercoopération SUISSE. DEZA/DDC/SDC/COSUDE. Les Interventions de la SUISSE dans lesecteur de la microfinance, March 23, 2005.

International Monetary Fund (IMF) Monetary and Financial Systems Department/The World Bank-Financial Sector Vice Presidency. FSAP mission, Terms of reference for joint Bank–FundFinancial Sector Assessment Program (FSAP) Mission, March 2005.

International Monetary Fund. Sixth Review under the Three-Year Arrangement Under the PovertyReduction and Growth Facility. IMF Country Report No. 05/156. May 2005.

Japan’s Official Development Assistance (ODA). Accomplishment and progress of 50 years.Ministry of Foreign Affairs. March 2005.

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Le monde à Madagascar. “Les trésors de la Grande Ile.” Communication Intermédia Journal LeMonde. April 2005.

LFS Financial systems Gmbh. “Madagascar, results of a prefeasability study for investing in amicrofinance bank in Madagascar.” Berlin, August 2004.

Madagascar—Financial Sector Assessment Program (FSAP), Seven Questions on Microfinance,March 23, 2005.

Ministère de l’agriculture, de l’Elevage et de la pêche “Plan Directeur Quinquennal pour ledéveloppement rural. Une approche de marché pour la lutte contre la pauvreté en milieu rural àMadagascar,” avril 2004-mars 2009 (February 17, 2004).

Ministère de l’Economie, des Finances et du Budget. Coordination Nationale de la Microfinance.Fiche de suivi trimestriel des activités de microfinance (modèle d’Identification: CEFOR, 1ertrimestre 2005).

Ministère de l’Economie, des Finances et du Budget (MEFB). Coordination Nationale de laMicrofinance. Compte-rendu de la Table Ronde des bailleurs de fonds du secteur de lamicrofinance à Madagascar. Hôtel Colbert, March 23, 2005.

Ministère de l’Economie, des Finances et du Budget (MEFB). Suite de la Table Ronde du 23 mars2005. “Information sur les interventions des bailleurs de fonds dans le secteur de lamicrofinance.”

National Microfinance Strategy (SNMF). Document de Stratégie Nationale de Microfinance(DSNMF) 2004 – 2009 », Approved June 15, 2004, Antanarivo, Madagascar.

National Microfinance Strategy (SNMF). Stratégie Nationale de la Microfinance, Table Ronde desBailleurs de Fonds. Gouvernement. Termes de références, March 2005, “Les Interventions desbailleurs de fonds dans le secteur de la microfinance.”

Perrin, Jean Noël. Note sur les commentaires formulés par la délégationl, 24.03 .2005. a délégation,24.03 .2005.

Perrin, Jean Noël. Note sur les commentaires formulés par le réseau CECAM, OTIV 2005.

PNUD. “Inventaire national des organisations financières de proximité (OFP) à Madagascar.” Juin2004, PNUD/MAG/00/06/USM (unité spéciale de microfinance).

PNUD/FENU/USM. Aide mémoire de la mission “Madagascar—le secteur de la microfinance:diagnostic et opportunités d’investissement” (14 juillet–06 août 2003).

Présidence de la République de Madagascar. Présentation “Madagascar naturellement! Une visionpour Madagascar et ses régions,” 2004.

Press. “Madagascar made ‘Extraordinary’ effort to become First Millennium Account Recipient,”Applegarth, April 2005.

Projet de Mise en Valeur Du Haut Bassin Du Mandrare. 2e Phase. Composante Appui aux servicesfinanciers. FIVOY. 2005.

PRSP. “Poverty Reduction Strategy Paper,” Update of July 2003.

Rajeriarison, Patricia, and Fidy Raharimanana. Final draft, “Madagascar SME Country Study”prepared for IFC, Antananarivo Office. September 2003.

Reda, Mamari, and Roland Rasoamanarivo. “UNDP Microfinance Assessment report.” June 1997.


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SEEP. Définitions de certains termes, ratios et retraitements financiers dans le domaine de lamicrofinance. November 2002.

TITEM (Union des mutuelles d’Epargne et de Crédit des Agriculteurs de Madagascar), RapportFinal “Recherche Action sur les pratiques paysannes de financement” dans la communed’Antakavana, Sous-Préfecture d’Ankazobe, septembre 2004.

TITEM (Union des mutuelles d’Epargne et de Crédit des Agriculteurs de Madagascar)—RapportFinal Recherche—Action pour l’identification et la valorisation des pratiques paysannes definancement dans la Commune rurale d’Ambatomanjaka/Région de l’ITASY, March 2004.

UE/ACP. Présentation du Programme-Cadre: Union Européenne/Etats d’Afrique, des Caraïbes et duPacifique (UE/ACP) sur la Microfinance, 2005.

UNOPS. Document, project number: MAG/92/COI, Guarantee Fund and Line of Credit Refinancefor small and micro enterprises, 1997, mid-term evaluation.

World Bank. Indicateur PAD par réseau. Septembre 2004, Agepmf. 1999–2003 et 2004 (réseauxOTIV et TIAVO). Tableaux: Indicateurs de performance quantitatifs des Régions Lac Alaotra,Fianarantsoa, Tamatave, Antsiranana, Antananarivo de 2002 à 2004.

World Bank. International Development Association Program Document for a proposal credit andan IDA grant, for a first poverty reduction support project to the republic of Madagascar, reportNo. 29376, MAG, June 2004.

World Bank. Project Appraisal document for the second private sector development project to theRepublic of Madagascar, report No. 20988-MAG, August 2001.

World Bank. Report No. n 2151 6-MAG. Project appraisal document on a proposed credit in theamount of SDR 69.2 Million to the Republic of Madagascar for a rural development supportproject. May 16, 2001.

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