UGANDA Microfinance Sector Effectiveness Review Ruth Goodwin-Groen, CGAP consultant Till Bruett, Alternative Credit Technologies Alexia Latortue, CGAP October 2004 Uganda Microfinance Effect iveness Review Page i CONTENTS Acknowledgments ............................................................................ii List of Acronyms ..............................................................................iii Executive Summary...........................................................................iv I. Background ........................................................................1 II. Overview of Microfinance in Uganda ............................................3 III. Driver No. 1: Shared Stakeholder Vision .......................................9 IV. Driver No. 2: Skilled Human Resources ........................................15 V. Driver No. 3: Intensive Stakeholder Collaboration ..........................18 VI. The Donor Role and the Use of Subsidies ........................................25 Selected Bibliography ........................................................................29 Annex 1: List of People Interviewed......................................................32 Annex 2. Ugandan MFI and Donor Survey Results....................................36 Uganda Microfinance Effect iveness Review Page ii ACKNOWLEDGMENTS In a short month earlier this year, we were privileged to meet a broad cross section of professionals in the microfinance sector in Uganda, as well as the sector champions from the past five years. Everyone we interviewed, individually or in a group, as well as those with whom we spoke briefly over the phone or in large meetings, was gracious and patient, and brought new insights into the development of the sector. We are truly impressed with the commitment and unity of purpose in serving low-income clients. With much gratitude, we thank each of you for your shared wisdom and trust this report will enrich your work. It was the private sector donors who had the foresight to see how much could be learned from Ugandan microfinance. It was the organizational prowess of Jackie Atenyi (GTZ), Gabriella Braun (GTZ), and Joanna Ledgerwood (SPEED) that enabled us to achieve so much in a short time. It was the Ugandan practitioners, government officials and consultants who gave us hope for the future because they believe microfinance is first about serving clients. We thank you all. Till Bruett, Ruth Goodwin-Groen, Alexia Latortue October 2004 Uganda Microfinance Effect iveness Review Page iii LIST OFACRONYMS AFCAP Microfinance Capacity Building PEAP Poverty Eradication and Action Programme in Africa Plan (Government of Uganda) AfDB African Development Bank PMA Program for the Modernization of AMFIU Association of Micro Finance Agriculture (government of Institutions of Uganda Uganda) PMS performance monitoring system BOU Bank of Uganda (AMFIU) CGAP Consultative Group to Assist the Poor PMT performance monitoring tool PRESTO Private Enterprise Support CERUDEB Centenary Rural Development Training and Organizational Bank Development (USAID) CMF Centre for Microfinance PSDG Private Sector Donor Group DANIDA Royal Danish Ministry of Foreign QCC Quarterly Coordination Council Affairs DFID Department for International SACCO savings and credit cooperative Development (United Kingdom) SIDA Swedish International Develop- ment Cooperation Agency EC European Commission FSD financial sector development SPEED Support for Private Enterprise Expansion and Development FSDU Financial Sector Deepening Unit (USAID) (DFID) SUFFICE Support to Feasible Financial GTZ Deutsche Gesellschaft für Institutions and Capacity Building Technische Zusammenarbeit Efforts (EC) IFAD International Fund for Agricultural UCA Uganda Cooperative Association Development UCAP Uganda Microfinance Capacity KfW Kreditanstalt für Wiederaufbau Building Framework MCAP Microfinance Capacity Building UCSCU Uganda Credit and Savings Project Cooperative Union MCC Microfinance Competence Centre UICA Uganda Institute of Chartered Accountants MDI microfinance deposit-taking institution USAID United States Agency for MFF Micro Finance Forum International Development MFI microfinance institution MoFPED Ministry of Finance, Planning, and Economic Development (Uganda) MOP Microfinance Outreach Plan MSCL Microfinance Support Center, Ltd. MTCS Medium-Term Competitiveness Strategy (Government of Uganda) NGO non-governmental organization PAP Poverty Alleviation Project (African Development Bank) Uganda Microfinance Effect iveness Review Page iv EXECUTIVE SUMMARY The Uganda Microfinance Sector Effectiveness Review attract international microfinance experts to the was undertaken in March 2004 at the request of the country. The result is a "virtuous circle" of skilled Private Sector Donor Group (PSDG), a working group human resources. of donors in Uganda that has guided many donor collaborative efforts in the country. The review A spirit of cooperation among microfinance examined the behavior and actions of all microfinance stakeholders in Uganda led to the creation of several stakeholders in Uganda from 1998 to 2003, identifying highly active, formal mechanisms for collaboration, factors that both contributed to the sector's success and including the PSDG (for donors), the Micro Finance hindered its effectiveness. Intended to be forward Forum (for all stakeholders, including high-level looking, the review also identified specific and government representatives, where they meet regularly actionable recommendations for expanding to discuss sectoral issues), its subcommittees (for microfinance in the country. technical consultations on key issues, such as capacity building, financing MFIs, consumer affairs, regulation, Microfinance in Uganda grew rapidly between 1998 and lobbying, and the industry association AMFIU and 2003 due to a combination of significant donor (Association of Micro Finance Institutions of Uganda). funding (approximately US$40 million); a shared These formal mechanisms have been accompanied by a stakeholder vision for the sector, including active significant number of informal working groups and government support for the vision; skilled human exchanges that have played an equally important role resources; and intensive collaboration among the major in effective collaboration. Other concrete successes stakeholders (practitioner organizations, donor include the development and adoption of "Donor agencies, and government bodies). At the end of 2003, Principles for Support to Uganda's Microfinance approximately 1,500 MFIs were serving more than Sector" in 2001, the passage of the Microfinance 935,000 small savers and close to 400,000 borrowers in Deposit-Taking Institutions Act(MDI) in 2003, and the the country. The Ugandan parliament passed the Micro development of a common donor reporting tool for Deposit-Taking Institution Act in 2003, which created Ugandan MFIs in 2003. the conditions for MFIs to become regulated, deposit- taking institutions. If microfinance in Uganda is to continue to flourish, a number of challenges must also be resolved. Shared stakeholder vision, skilled human resources, Resolution of these challenges will require conscious and intensive stakeholder collaboration have been the stakeholder action in both policy and implementation. three major drivers of effective microfinance in Among these challenges are the need for a coherent Uganda. A shared stakeholder vision was developed rural finance strategy that goes beyond microfinance over time by a close-knit network of leaders in MFIs, institutions; over-ambitious government expectations government ministries, and donor agencies. This vision of microfinance, particularly with respect to rapid rural allowed the stakeholder network to coalesce, build outreach; political pressure on the government to consensus on microfinance good practice principles, intervene in the microfinance market; the need for and consistently apply those principles. It also worked renewed sector-wide training to develop greater depth to effectively orient newcomers to the Ugandan of microfinance resources in Uganda; and inadequate microfinance community. Other successes of the protection of poor people's savings in savings and shared vision include the government's termination of credit cooperatives (SACCOs) and non-governmental the Entandikwa credit program, and its subsequent organizations (NGOs). decision to refrain from providing financial services directly to citizens. Ugandan microfinance has reached a critical point in its development. Either it will evolve into a dynamic The high level of technical skill among all stakeholders market that is fully integrated into the national has made microfinance in Uganda extremely dynamic. financial system, and provides a wide range of The local microfinance community made good use of financial services to most of the population, or it will training, technical assistance, and international remain a successful, but marginal, development niche. resources to build a cadre of knowledgeable To achieve the preferred first option, stakeholders must microfinance specialists in MFIs, government agencies, pro-actively make microfinance part of a larger, local donor offices, and major microfinance projects. financial sector development strategy. The presence of local specialists in turn continues to Uganda Microfinance Effectiveness Review Page v Building a pro-poor financial system in Uganda means building retail institutions, the infrastructure to support these institutions (e.g., audit firms and credit rating agencies), and an enabling environment. These components are, to various degrees, being addressed by Ugandan microfinance stakeholders. Yet, numerous gaps remain. Current efforts are not yet guided by a strategic vision for reorienting the financial system to serve the poor. This reorientation will first require each stakeholder to define its respective role and comparative advantage in the financial system as a whole, not solely within the microfinance sector. The practical recommendations in this review are intended to contribute to the development of a financial system strategy for reaching a far greater number of poor clients throughout Uganda with a diverse range of quality financial services. It is hoped that the review will also provide valuable lessons for microfinance and financial system development in other countries. Uganda Microfinance Effectiveness Review Page 1 I. BACKGROUND This review was requested by the Ugandan Private systems. Peer Reviews of 17 bilateral and multilateral Sector Donor Working Group (PSDG) following a agencies and three field visits were completed between CGAP visit to Kampala in April 2002 as part of its aid April 2002 and November 2003. effectiveness work. Microfinance experts from three donor programs developed terms of reference (TORs) Box 1. Donor Effectiveness for an analysis of the development of the microfinance Donor actions that contribute to the permanent sector in Uganda from 1998 to 2003, focusing on the availability of appropriate, client-responsive financial reasons behind successes and failures (or missed services via sustainable institutions and mechanisms on opportunities). The final TORs were then discussed a massive scale. with CGAP and the PSDG. The review is not a The exercise culminated in a meeting in February comprehensive sector study. Rather, it focuses on the 2004, "Leveraging Our Comparative Advantage to behavior and actions of all microfinance stakeholders Improve Aid Effectiveness," that brought together (donor agencies, government bodies, and practitioner heads of agencies and technical staff to synthesize organizations) to identify success factors and lessons learned from the Peer Reviews and discuss constraints to good microfinance practice and effective future steps for collective action. Following the donor coordination. meeting, the 17 agencies issued a Joint Memorandum in which they endorsed five core elements of donor Uganda was a good country to study because of the effectiveness in microfinance: (1) strategic clarity; (2) high level of strategic coordination among the strong staff capacity; (3) accountability for results; (4) government, industry practitioners, and donor relevant knowledge management; and (5) appropriate agencies. These stakeholders share a common vision instruments. They also committed to a four-step work for the microfinance industry that was proposed by program and gave CGAP and their agencies a clear donors and documented in the Donor Principles for mandate to conduct country-level reviews. Support to Uganda's Microfinance Sector of 2001. The principles were subsequently adopted by all The Uganda review thus became the precursor to a stakeholders. The timing of the visit was also series of planned Country Level Effectiveness and appropriate, given that Ugandan microfinance is an Accountability Reviews (CLEARs). The review team emerging market poised for increasing for Uganda included Ruth Goodwin-Groen, CGAP professionalization and growth. Market trends over the consultant, Till Bruett, consultant with Alternative past five years and new opportunities presented by the Credit Technologies, and Alexia Latortue of CGAP. Microfinance Deposit-Taking Institutions (MDI) Act The full team was in Kampala on February 23?27, of 2003 have combined to open the door to a new 2004, with Ms. Goodwin-Groen and Mr. Bruett potential phase of development. staying on for an additional three weeks (through March 19). The team interviewed over 75 people The review includes practical recommendations for representing a broad cross section of stakeholders from how the Ugandan microfinance sector as a whole can senior government officials to commercial bankers to build on its achievements to date to improve its MFI representatives from both the largest effectiveness. The recommendations are intended to microfinance institutions (MFIs) based in Kampala, feed into ongoing discussions to help all stakeholders and a rural MFI eight hours from Kampala. rethink strategies to reach a far greater number of Interviewees also included donor representatives from clients throughout the country with a diverse range of the full spectrum of donor agencies and donor quality financial services. PSDG and CGAP also hope microfinance projects in Uganda. In addition to that the review will provide valuable lessons for other holding individual meetings, the team distributed countries. questionnaires, organized a series of focus groups, conducted telephone calls with donor representatives The request for the review coincided with the CGAP highly involved in Ugandan microfinance who had Aid Effectiveness Initiative. Launched in 2002 with since left the country, and read existing reports on ministers and heads of agencies, the Microfinance Ugandan microfinance. Donor Peer Reviews addressed aid effectiveness from a unique perspective. They compelled donor agencies The team introduced the purpose of the review to a to look at themselves and focus on what they can most group of stakeholders at the beginning of their visit directly influence: their own procedures, practices, and and organized two debriefing meetings at the end to Uganda Microfinance Effectiveness Review Page 2 present their initial analysis and recommendations to stable political and economic environment, also played the PSDG and a broader group of stakeholders. The a role. These three chapters examine the drivers first in two consultants were joined by Brigit Helms and Eric terms of successes, then in terms of missed Duflos from CGAP for the debriefing presentations. opportunities. The missed opportunities provide the foundation for the recommendation that the sector The report analyzes the drivers of microfinance sector move into a fully developed market phase, with the effectiveness and makes recommendations to improve complete integration of microfinance into Uganda's this effectiveness in Uganda. The analysis and financial system. Chapter VI addresses the role of recommendations come from the findings of the donors and the use of subsidies, highlighting the review team and feedback from stakeholders during successes and missed opportunities of donor agencies, the debriefing presentations. The review team and which have played a special role in helping develop CGAP staff are available to discuss these microfinance in Uganda. recommendations in more detail and to support the various stakeholders as they implement them. To do Other factors, discussed in less depth, also provided a so, additional visits to Uganda can be envisioned. positive context for microfinance to flourish in the country: the stable political and economic environment Chapter II, "Overview of Microfinance in Uganda," in Uganda, including a supportive policy framework; provides a brief history of the phases of development generous support from international donors; and an of microfinance from the mid-1990s onward. Chapters indigenous entrepreneurial culture. These supportive III to V address three drivers of effectiveness in the country conditions facilitated the growth of Ugandan microfinance sector: (1) shared stakeholder microfinance, but cannot be said to have propelled its vision; (2) skilled human resources; and (3) extensive successes. As such, they are not considered to be stakeholder collaboration. Together, these drivers were drivers. the principal forces that drove achievements in the microfinance sector, although other forces, such as the Uganda Microfinance Effectiveness Review Page 3 II. OVERVIEW OFMICROFINANCE INUGANDA The review was conducted during a crucial period for note that the development of microfinance in Uganda the Ugandan microfinance sector. Urban markets are can be attributed to the high rate of entrepreneurship in becoming saturated with microcredit and, for the first the country, particularly among women. These time, MFIs are starting to compete for clients. The perceptions are corroborated by a 2003 international MDI Act adopted in 2003 will allow several MFIs to study of entrepreneur-ship that ranked Uganda among become regulated deposit-taking institutions, enabling the top five "most entrepreneurial countries" of the 41 them to safely offer clients more services and finance studied. 3 growth with local capital. Commercial banks are increasingly recognizing the potential of the Microfinance as part of the larger development microfinance market and are currently focusing on agenda. The three major government policy small savings mobilization. The Microfinance documents that drive the national economic agenda-- Outreach Plan (MOP) coordination unit under the the Poverty Eradication and Action Plan (PEAP), the Ministry of Finance (charged with implementing the Program for the Modernization of Agriculture (PMA), MOP and administering donor funds channeled to the and the Medium-Term Competitiveness Strategy microfinance sector), is actively preparing to catalyze (MTCS)--all deliberately include microfinance. These sector-wide training efforts. All of these trends are are living documents, used and updated by all occurring in the shadow of the approaching 2006 stakeholders in the sector. It is remarkable that they presidential elections. explicitly recognize savings as critical to the development of the sector as a whole. Specifically, the Based on the trends of the past five years, all MTCS prioritizes the promotion of savings and the indications are that the sector is at a crossroad: restoration of public confidence in the financial sector, microfinance in Uganda will either evolve into a with an emphasis on small deposits. Similarly, the dynamic market that is fully integrated into the PMA and the MOP both emphasize the need to work financial system and provides a wide range of financial with savings-based institutions in rural areas. services to most of the population, or it will remain a successful, but marginal, development niche. The 2003 revisions to the PEAP also analyzed the challenges in the microfinance industry. These Microfinance in Uganda: Context and Outreach included capacity building, outreach, product mix, agriculture finance, regulation of unregulated and Led bythe firm hand of President Yoweri Museveni in unsupervised microfinance providers (known as "tier partnership with an active international donor 4" institutions), savings mobilization, commercial bank community, Uganda has enjoyed an unprecedented down-scaling, interest rates, credit references, impact period of political and economic stability since the assessment, and industry consolidation. The inclusion mid-1990s. The literacy rate is climbing (now nearly of such a thorough analysis in the national poverty 80 percent), and the HIV infection rate is falling. eradication plan illustrates the seriousness with which Financing from donors presently covers more than 50 microfinance is treated by the government in Uganda. percent of the national budget, one reason why Uganda is often referred to as a "donor darling." President Museveni believes that financial services are key to his nation's future and keenly follows MFIs, Uganda has a population of nearly 24 million and 86 percent of its working population is self-employed.1 from the outreach they achieve to the interest rates they charge. His interest, fostered by the sector's success, Close to 1.5 million people--nearly 90 percent of the means that microfinance receives much more non-farming active population--are employed in government attention in Uganda than in most other micro- and small enterprises, representing a significant market for microfinance.2 countries. The importance that the government of Uganda places on microfinance is facilitating the development of the sector, but it is also posing certain Microfinance in Uganda has been built on the risks, such as political pressure, which in the past has foundation of entrepreneurial clients. MFIs lead to direct intervention of the government at the consistently report that their institutional success is due retail level. In all countries, governments have a to their hard-working clients. Commercial banks also constructive but limited role in building financial 1MoFPED, "PEAP Revision." 2Kappel and others, The Missing Links, 51. 3Reynolds and others, Global Entrepreneurship Monitor 2003. Uganda Microfinance Effectiveness Review Page 4 systems that work for the poor. Microfinance good savers of commercial banks would greatly increase this practice suggests that the optimal role of the number. government is to develop sound policy frameworks and encourage vibrant and competitive micro-finance Ugandan Microfinance: Phases of among private sector actors, rather than to directly provide financial services. Development Ugandan microfinance has followed a typical pattern Figure 1. Estimated Outreach of Reporting MFIs, of market development. It progressed smoothly from 2003* an emerging market to a growth market, and is now poised to reach the developed microfinance stage.5 1995­2000: Emerging market. These five years are known as the "business approach" period. Although some donor projects began earlier (e.g., the Poverty Alleviation Project of the African Development Bank, or AfDB), the Private Enterprise Support Training and Organizational Development (PRESTO), launched by the US Agency for International Development (USAID) in 1997, marked the emergence of good practice microfinance in Uganda. PRESTO fostered a commitment among all stakeholders to a private sector, business approach to microfinance. Through its Centre for Microfinance (CMF), PRESTO offered training in micro-lending good practices to all interested organizations. It then offered technical assistance and access to a grants program to help the institutions that implemented good practices, enabling them to grow. These efforts, combined with technical and financial support from other donors, international NGOs, and Total number of borrowers: 395,282 Total number of savers: 935,815 programs such as the Microfinance Capacity Building Programme in Africa (AFCAP) produced a core group of strong MFIs in the country. Microfinance outreach. Since the mid-1990s, the Ugandan microfinance industry has experienced a continuous upward growth trend. While exact data is Box 2. Features of Commercial Bank Saving Products not available, it is estimated that at the end of 2002 · Tiny minimum initial deposit of UGSH 10,000 (US $5) there were more than 1,300 microfinance organizations · Low or no interest rate operating through 500-plus branches, including a · Often ATM-only accounts, ATMs in convenient specialized commercial bank (Centenary Rural locations Development Bank, or CERUDEB), a regulated credit · Use of microfinance strategies for attracting clients, institution (Commercial Microfinance, Ltd., or such as lotteries for regular savers CMFL), several limited companies, hundreds of NGOs, and over a thousand cooperatives and other In 1997, several donors and MFIs also began to work community-based organizations.4 In 2003, several with a few key government officials on international hundred more SACCOs were founded, bringing the good practice. This process commenced when leaders total to over 1,500. Together, these institutions serve from the Bank of Uganda (BOU), the Ministry of more than 930,000 savers (see figure 1). The poor Finance, local MFIs, and donor agencies attended a World Bank/World Bank Institute training workshop in 4From the "Preliminary Analysis of the National Baseline Survey South Africa on microfinance. Additional workshops of Micro Finance Institutions in Uganda." *Top-tier MFIs include CRS Hofokam, FAULU, FINCA and study tours in Uganda, Kenya, and Bolivia FOCCAS, Feed the Children, MEDNET, Pride, TERUDET, UMU, followed. During the conferences and through the and UWFT. Top-tier SACCOs include all members of the SACCO apex institutions, Uganda Cooperative Association (UCA), and Uganda Credit and Savings Cooperative Union (UCSCU). 5For a characterization of growth and developed markets, see Programs are organizations that offer financial services as a Grant and Theodore, "Marketing in Microfinance Institutions" secondary business (draft). Uganda Microfinance Effectiveness Review Page 5 contacts that continued thereafter, the participants initially by an active group of donors, then by AMFIU. forged a baseline agreement on principles of good Ultimately it was integrated into all key sector practice for the sector and thus became the early documents. champions of good practice microfinance in Uganda. Individuals involved in the process cite the exposure to The government kept to its decision not to provide what was happening elsewhere and the ability to funding at the retail level, although it did funnel network with a small group of practitioner and wholesale funds to a private sector entity on more government leaders as the key building blocks to commercial terms.7 Donors also provided funding to sustainable microfinance in Uganda. MFIs on more commercial terms and facilitated MFI borrowing from commercial banks through the use of Informal contacts among donors, MFIs and partial guarantees. By the end of 2003, all of the top- representatives of the Ministry of Finance were tier Ugandan MFIs had loans or credit lines from channeled into a more formal mechanism for banks. The European Community (EC) is an excellent collaboration during the process of organizing the example of this evolution from a donor perspective. In national microfinance workshop in 1998, the Micro 1998, the EC switched from direct lending to micro- Finance Forum (MFF). All stakeholders were involved enterpreneurs to lending to MFIs. In the early 2000s, it in the founding of the MFF, and in 1998 the Ministry began providing guarantees to banks to reduce their of Finance formally requested that the forum become risk of lending to MFIs. the main discussion group for microfinance. Specifically, the growth years were marked by: The "emerging years" also featured noteworthy failures, including the collapse of the government's · Increased competition and the active Entandikwa credit program and the Cooperative Bank. participation of commercial banks. MFIs started These failures reinforced the belief that microfinance is to compete more for clients than for donor funds. best managed as a private sector activity and led to the One observer noted, "the days of product-driven government of Uganda's commitment to withdraw MFIs are numberedthe winners will be those from direct lending. Key lessons learned included: banks and MFIs with a strategic marketing government credit programs are often politicized; focus...and a better understanding of the clients clients do not feel obliged to repay subsidized loans; they serve."8 Commercial banks began taking an the government has neither the human nor the financial active interest in the sector as a profitable business resources to run a nationwide loan program; and opportunity, mostly focusing on retail savings and interest rates must be set at market levels by private wholesale lending to MFIs. The use of technology service providers or costs will not be covered. by innovative banks such as Nile and Orient drove down the cost of serving the "mass savings In late 1999, the BOU issued a policy statement on market." On the lending side, most commercial microfinance regulation that confirmed the role of the banks lent to top-tier MFIs rather than develop government as an enabler, rather than provider, of their own loan products for poor clients, both microfinance. The BOU supported the view of "micro- because the Banking Act does not allow group finance as a line of business," and foresaw the creation collateral and because of the time and cost of a four-tier financial system that included (1) banks, involved in developing new technologies to reach (2) credit institutions,6 (3) microfinance deposit-taking this market segment. Moreover, guarantee facilities institutions, and (4) all other financial service pro- available from the EC's Support to Feasible viders, such as non-governmental organizations, Financial Institutions and Capacity Building savings and credit associations, and community-based Efforts (SUFFICE) project and USAID's Support organizations. for Private Enterprise Expansion and Development (SPEED)9 project reduced the risk of lending to 2000-2003: Growth market. This period is best MFIs. While this capital is not cheap (annual characterized as the "commercialization period." No 7 single donor program dominated this period, but many Government-financed lending to MFIs is effected through a private company, Microfinance Support Center, Ltd., which was contributed to building up a group of sustainable, founded by the government, is governed by an independent board, commercially-oriented MFIs. A vision and donor and funded through AfDB loans and grants to the government of principles for microfinance was codified in 2001, Uganda. 8Wright and Rippey, The Competitive Environment in Uganda, iv. 9SPEED managed the USAID Development Credit Authority 6These institutions are similar to finance companies in other guarantees. These guarantees were offered to commercial banks to countries, but are allowed to intermediate deposits. cover their exposure to MFI risk. Uganda Microfinance Effectiveness Review Page 6 interest rates of around 15-20 percent, with a lien areas with few other alternatives, SACCOs in on an MFI's receivables), it can be easily accessed Uganda are seldom held to any standards. None are and integrates MFIs directly into the financial currently regulated or adequately supervised. system. Discussions about other possible strategic The growth in SACCOs is partly explained by the alliances between banks and MFIs also began in lack of services in rural areas. While urban markets the early 2000s. are approaching saturation for some products, rural · Passage of the Microfinance Deposit-Taking areas (where 75 percent of Uganda's population Institutions Act, 2003. Long technical lives) remain underserved, with about only 20 consultations (managed by GTZ) and political percent of prospective rural clients receiving negotiations resulted in the passage of the MDI financial services.10 Keygovernment policies have Act, opening the way for the strongest MFIs to highlighted the role of microfinance in agricultural become true financial intermediaries regulated by and rural development. Both the Program for the the BOU. The 2003 legislation is exemplary Modernization of Agriculture and the Medium- because rather than concentrate on legitimizing Term Competitiveness Strategy more or less microcredit or other narrow aspects of delegate their strategies for rural financial system microfinance (as is common in other microfinance development to MFIs, placing a burden of very regulation), it focuses on protecting poor people's high expectations on the sector. savings. This important legislation promises to · Re-invigorated Association of Microfinance help MFIs reduce their dependence on donors, Institutions in Uganda (AMFIU). Launched by grow more rapidly, and offer savings services to governor of the Central Bank in 1997, when the their clients. Although only a few MFIs are likely government decided to get out of microfinance to become microfinance deposit-taking institutions service delivery, AMFIU consolidated its position (MDIs) in the next few years, the legislation paves as the primary collaborative mechanism among the way for the incorporation of larger MFIs into MFIs. It was the principal representative of MFIs the formal financial system. The consultative in collaborative efforts with other stakeholders process was also a good illustration of the ability during this period. of the government, practitioners, and donors to work together toward a common goal. AMFIU · Development of the Microfinance Outreach Plan played a pivotal role in this process, leading an (MOP). Funded by IFAD, DANIDA, and other initiative to educate politicians and the public, with donors, the MOP seeks to massively increase the technical and financial support from GTZ and outreach of sustainable microfinance in Uganda, SPEED. especially in rural areas. The initial catalyst for the · Amplified focus on savings and rural areas. MOP was a presidential statement in 2001 that the government of Uganda would inject US $5,000 in During 2000-03, all stakeholders in the each of the 5000 parishes in Uganda. This microfinance sector became acutely aware that the successes of delivering microcredit in urban areas statement provoked an immediate fear within the microfinance community that such a cash were not sufficient for reaching rural areas and disbursement would undermine the sector. intermediating savings effectively. Emboldened by Microfinance stakeholders responded quickly, the changes in the financial regulatory framework, urging the government of Uganda to remember the several MFIs increased savings mobilization and a failed Entandikwa program and to allow the few developed savings products. Not to be outdone private sector (MFIs) to take responsibility for by the MFIs, commercial banks reduced or increasing the outreach of financial services. Other elimin ated minimum deposit balance requirements objectives soon were added, including focusing the to successfully attract small savers in anticipation government's efforts on improving the enabling of the passage of the MDI Act. The number of environment for microfinance and supporting SACCOs also mushroomed during this period, capacity building, as well as increasing rural after the vice president publicly encouraged the outreach. creation of new SACCOs. The vice president viewed these organizations as a means by which The MOP clearly achieved the goal of responding poor Ugandans in rural areas could generate wealth to the presidential statement: the government of through self-help. By early 2004, there were an Uganda decided not to hand out money, but rather estimated 1,300 SACCOs in the country, up from urged the microfinance providers to increase their 250 in 1998. Although these institutions are important providers of financial services in rural 10Wright and Rippey, The Competitive Environment in Uganda, 2. Uganda Microfinance Effectiveness Review Page 7 outreach. At the time of the review, the MOP was consider microfinance in the context of the larger controversial for a number of reasons, including financial system. the role envisioned for financial extension workers and concerns that unsustainable institutions will Beginnings of Financial System Integration. benefit from significant funding, thus distorting the Integrating microfinance into the financial system microfinance market. Components of the plan are means looking at all three different levels of financial now being implemented through existing programs system development: the micro-level of retail and agencies, such as SUFFICE managing the providers, the meso-level of industry infrastructure, capacity building unit, and AMFIU setting up a tier and the macro-level of the enabling environment. This 4 performance monitoring system. By using approach requires taking a broad look at the players in agencies with appropriate technical expertise and each of these areas, understanding the constraints they political independence, the MOP hopes to avoid face in expanding poor people's access to financial undermining the market for sustainable services and finding ways to overcome these microfinance providers. constraints. · Commitment to more transparency and reducing the reporting burden on MFIs. Initiated by MFIs alone cannot solve all of these constraints or AMFIU, supported by the government of Uganda, serve all markets. The financial systems approach and then taken on by the EC's SUFFICE program, shows that by putting clients in the center, stakeholders the USAID SPEED project finalized the can more cle arly see what is needed to serve them. At development of a common donor reporting tool, the core of Uganda are poor households: more than 60 percent are engaged in agricultural production and 75 the performance monitoring tool (PMT), in 2003. percent live in rural areas. Fifteen donors--all of the donors active in It is estimated that 38 percent of all Ugandans live microfinance in Uganda--adopted the PMT for below the national poverty line, 94 percent of whom reporting by the MFIs that they supported. The live in rural areas.11 At the same time, millions of PMT reduces the administrative burden on MFIs Ugandans are moving to urban areas and entering into and allows donors to apply consistent definitions the manufacturing and trade sectors each year.12 MFIs and good microfinance practices in tracking the have a unique opportunity to serve both rural and performance of their MFI partners. urban markets, and the people transitioning between · Shift of Microfinance Unit to the Ministry of them, as long as they understand the realities that their Finance. In October 2003, President Museveni clients and potential clients are experiencing. endorsed the move of the microfinance unit from the prime minister's office to the Ministry of Finance, signaling that all financial matters would be under the supervision of the Ministry of Finance. In spite of this positive step, some people continued to express concern about possible government influence beyond its proper regulation and supervision role. 2004 and beyond: Microfinance in Uganda. In 2004, Uganda is at a crossroad: Stakeholders can collaborate to build a developed market or rest on their accomplishments and leave microfinance as a development niche. The sector's well-known success within Uganda, and the extensive documentation of this success, has contributed to high expectations among political leaders. Microfinance stakeholders expressed concern that microfinance has been oversold, while other aspects of financial sector development and poverty intervention are being neglected. Stakeholders noted that many of the microfinance sector's shortcomings are linked to overall financial system weaknesses. To move forward, 11Kappel et al, The Missing Links, p. 23. stakeholders need to look beyond retail MFIs and 12Ibid., 38. Uganda Microfinance Effectiveness Review Page 8 Table 1. Description of Ugandan Microfinance Market* Emerging Market Uganda Activities, 1995-2000 Results MFIs · Estimated 120,000 clients served** · International PVOs enter/expand in market · One bank and five MFIs had more than · Focus on group lending, basic best practices 10,000 clients · CERUDEB expands under IPC management · BOU issued policy statement on microfinance regulation proposing four-tier system, Donors commits to MDI regulation · AfDB/PAP grants develop community-based organizations with microenterprise lending · Microfinance Forum (MFF) created to facilitate dialogue between stakeholders · PRESTO/CMF focus on basic practices, business approach, group lending · Microfinance incorporated into national poverty alleviation plan (PEAP) · PRESTO and others provide grants and technical assistance to support strongest MFIs · Government of Uganda agrees to shut down Entandikwa credit program · Multiple donors sponsor policy and regulation conferences and exchanges for government and practitioner representatives · GTZ assists BOU with policy framework Government · Entandikwa program fails, with a large amount of non-payments · BOU and MoFPED acquire knowledge of microfinance policy and regulation · BOU closes Coop Bank and privatizes Uganda Commercial Bank Other · Certification of AFCAP trainers · Search for permanent home for PRESTO/CMF · Stakeholders start roundtable forum for MF discussions * Adapted from Grant and Theodore, "Marketing in Microfinance Institutions," 12. ** Estimate from Pearson, unpublished report, "Ugandan Donor's Workshop." Growth Market Uganda Activities: 2000-2003 Results MFIs · Estimated more than 930,000 savers · MFIs penetrate Kampala and most secondary cities · MFIs borrowing from commercial banks, · Unregulated MFIs begin intermediating deposits intermediating depos its from clients · Strengthening of AMFIU · Banks lower minimum deposit size, add ATMs · Lobbying of MDI bill · Practitioners succeed in developing a stronger network organization (AMFIU) Donors · USAID/SPEED supports transforming MDIs · Over 1,000 SACCOS formed · EC/SUFFICE supports training, lending to MFIs and bank guarantees · Donor principles for support of microfinance adopted, outline vision for growth market · AfDB/RMSP/MSCL supports lending to MFIs · All MF donors agree to standard performance Government monitoring tool · GTZ/BOU develop MDI regulatory regime · Microfinance included as component of PMA · MDI bill drafted and MTCS · President promises US $5,000 for each parish · MDI Act passed · Vice president urges SACCO creation · BOU drafts regulations for MDIs · Parliament requests and President orders transfer of all government · MOP office created microcredit schemes to MoFED · Government of Uganda concentrates all MF Other activities (except cooperatives) under · MFF develops subcommittee mechanism MoFPED · MCC carries on PRESTO training with modest results · MFF "institutionalized" as advisory body to outreach plan office · Microfinance Outreach Plan (MOP) developed; funded by donors, but managed by government Uganda Microfinance Effectiveness Review Page 9 III. DRIVER NO. 1 SHARED STAKEHOLDER VISION Stakeholders in the microfinance sector in Uganda vision for the future of microfinance, including key successfully developed a shared vision that allowed all outreach targets for the year 2005. Through an players--practitioners (MFIs), donors, and the intensive consultative process, practitioners and the government of Uganda--to move in the same government also came to buy into the vision presented direction. The core unifying value of the shared vision in the principles. was a deep-seated conviction that poverty outreach and sustainability are twin pillars that must be achieved Consistent adherence to good practice principles. together. At its most successful, the shared vision Having developed a shared vision and commitment to allowed these stakeholders to work collaboratively and good practice principles, stakeholders in Uganda then take advantage of one another's strengths. It generated strove to act in accordance with them. The two best broad consensus because it encompassed diverse good examples of stakeholders translating the vision into practice microfinance interventions, rather than action are the MDI Act (2003) and donors' funding prescribing one preferred implementation method or policies. institutional type. Yet, fundamental differences persist concerning how best to build a retail infrastructure to Initial debates about a regulatory framework for reach massive numbers of poor people. Also, the role microfinance took place at the same time that of microfinance within the financial system and the stakeholders were working to define a vision for the broader development agenda remains unclear for sector; the two discussions informed each other. many. Drafting the MDI bill and ensuring its eventual passage into law in 2003 was a tremendous group effort that Successes brought the entire sector together. The final legislation reflects the core principles of the vision, affirming that Effective process for developing good practice microfinance is a financial services business that principles. Three major factors explain the successful focuses on "low-income households." development of the shared vision: (1) multiple collaborative meetings--stakeholders met repeatedly Box 4. Examples of Good Practice Principles and and cooperated on multiple concrete projects, thus Goals building trust and a sense of joint accountability for the Stakeholders in the microfinance sector of Uganda agreed on goals, principles, and a code of conduct. sector's development; (2) microfinance champions-- technically skilled advocates--represented each of the Microfinance goals three major stakeholder groups (MFIs, donors, and the - Offer a range of financial services, with new credit and savings products, focused on rural populations. government) and were able to engage in a high level of debate and discussion; and (3) investment of sufficient - Establish linkages between MFIs and formal financial institutions. time--the vision was developed over a period of three - Aim for average client growth of 25 % per year years, allowing real understanding and consensus to (compounded). emerge. - Increase number of rural clients to 60 % of total clients. Box 3. Stakeholder Clarity in the Eyes of Ugandan MFIs Microfinance principles An informal survey of 13 MFI representatives by the - Microfinance is a business, not a welfare activity. review team gave stakeholders an average of 80 percent - Microfinance is a private sector activity inappropriate out of 100 percent on clear and consistent vision. for direc t government intervention. By defining the vision for the sector first, the actors - Microfinance encompasses savings as well as credit services. avoided getting bogged down in principles and - Microfinance is a key poverty alleviation tool. philosophical debates. Only when consensus was reached on the vision did the actors focus on "how do Donor code of conduct we get there?" The agreement on good practice - Transparency and information sharing are crucial to building an effective microfinance sector. principles and objectives for Ugandan microfinance - International standards of good practice are desirable was ultimately codified in the Donor Principles for to follow. Support to Uganda's Microfinance Sector in 2001. These principles highlighted the donors' common Uganda Microfinance Effectiveness Review Page 10 Despite the fact that they incurred no penalties for non- sector, and the PSDG, moreover, fuels the divide compliance, most donors consistently tried to apply the between microfinance and rural finance. 2001 Donor Principles to their funding of microfinance in Uganda--and to hold others to them. Their ability to As one commercial banker noted, "When it comes to translate the document into action can be attributed to financial system development, everyone seems to be technically skilled champions who integrated the waiting for the others." Stakeholders in microfinance principles into their respective government and agency have not sought to fully understand how they fit into policies. The Quarterly Coordination Council of donor the financial system, nor what their respective and donor projects was organized by the EC's comparative advantage is in different levels of the SUFFICE to coordinate applications, review system (micro, meso, and macro). performance appraisals, and coordinate monitoring and evaluations. Working in a context where the local No process for updating the vision. The stakeholder government shared similar principles was also crucial. vision for the Ugandan microfinance sector is outdated An encouraging example of the application of sound and narrow. Microfinance in Uganda is moving microfinance principles was provided by the AfDB and quickly and has seen many new developments, for the government of Uganda, who collaborated to find a example, the introduction of microinsurance products. mechanism that would direct an AfDB government Yet, there is little stakeholder wide momentum to loan to private sector microfinance (see box 5). define a process or mechanism for integrating the new learning and practices into the documented vision. Box 5. Implementing Private-Sector Funding Given the natural turnover of staff in all stakeholder groups, most especially among donors, an outdated The AfDB was able to honor the private sector principle of microfinance, even when its financial instrument was a vision risks impeding progress. New staff will not be direct loan to the government, because the Government so committed to the vision and the loss of a sense of of Uganda had internalized the same principle. common purpose underpinned by a current, shared Government policy w as to refrain from direct involvement vision may result in splintered and conflicting actions. in the implementation of credit projects, so the government of Uganda and AfDB created a private corporation to distribute AfDB funding. Not only did the Lack of protection of savings in SACCOs and NGOs AfDB initially channel US $2 million through this not sufficiently addressed. Stakeholders acknowledge corporation, it halted funding in 2001 for two years when they have not yet found ways to protect the savings an AfDB review mission found that the company had not held by tier 4 institutions, which hold the majority of been set up properly. Only after the company was reorganized and a new management team was fully in poor people's savings. The 1,300 existing SACCOs place did the AfDB renew its funding in February 2004. had a turnover of approximately UGSH 30 billion (US $15 million) between 2000 and 2003. However, the Missed Opportunities Commission for Cooperatives has neither the skilled personnel nor the power to identify and close down Narrow definition of microfinance. The future mismanaged SACCOs, and the BOU does not consider financial service needs of all low-income clients will tier 4 institutions its responsibility. The Poverty not be met if microfinance remains a specialized Reduction Support Credit (PRSC) requires that development intervention. Stakeholders in the SACCOs be strengthened in line with international Ugandan microfinance sector have been heavily standards, such as the PEARLS monitoring system focused on two elements of microfinance: retail-level developed by the World Council of Credit Unions. NGO transformation and the regulatory environment This is a positive move, but negotiations are going very for this new type of non-bank financial institution. The slowly. majority of stakeholders do not yet have a clear understanding of what the entire financial system Mistaken assumption that microcredit is a panacea comprises or of how the microfinance market can for poverty. Many politicians mistakenly believe that develop within that system. Few recognize the microcredit alone can lift people out of poverty. What challenge of developing other types of financial is more, they want it to accomplish this feat with low institutions, particularly in rural areas (such as leasing interest rates, often insisting that the 3­5 percent or insurance companies, or informal structures such as monthly interest that is commonly charged is too high. SACCOs), or building the infrastructure (audit firms, The concentrated attention given to the sector at the raters, credit rating agencies, etc.) that can support the highest level in government policy documents and growth of a broader financial system. The division speeches has placed pressure on microfinance to between the Agricultural Sector Donor Group, a group produce over-ambitious results. It has also stunted of donor representatives that support the agriculture public policy debates on what other services poor Uganda Microfinance Effectiveness Review Page 11 people need to complement microfinance and reduce Risk of microfinance becoming a pawn in the 2006 poverty, including a comprehensive plan to address elections. Elections in any country can lead even the rural poverty. most well-informed and well-intentioned politicians to abandon sound principles. Uganda is no exception. Box 6. Reaching Rural Areas: Support Market Stakeholders in the microfinance sector are fearful that Leaders or Broad-Based MFIs? microfinance offers a soft target for potential Many stakeholders in Uganda believe t hat supporting a politicians because it deals with money for the small number of large, efficient, and sustainable MFIs (e.g., microfinance deposit-taking institutions) is the best masses--a tempting but potentially lethal combination. way to increase outreach and ensure that quality Indeed, the political drums of microfinance have services will be available on a large scale in rural already starting beating in anticipation of the upcoming regions. In this view (referred to here as the "market elections. Using microfinance as a means of leader" view), a small number of large institutions would expand into rural areas and be financed through local transferring resources to people before an election can deposits and commercial financing, not subsidized funds. have disastrous consequences for the credit culture of Proponents of this view contend that the most impor tant both clients and serious institutions trying to provide job of donors is to "pick the winners" well. quality financial services on a sustainable basis. Other stakeholders believe that the large institutions will take too long to reach rural areas and that support Recommendations should be given to the many smaller MFIs already 1. Develop a process to update the vision of a pro- located in rural areas. These stakeholders believe that the small institutions have a true desire to innovate and poor financial system. A new vision of the entire find ways to reach agricultural and very poor financial system as a system that works for poor people communities and offer the best solution for rural is needed. Such a system would offer poor clients a microfinance. They believe that the higher transaction broad range of financial services (including costs of reaching rural clients may make sustainability unattainable and justify using subsidies (the "broad- remittances, insurance, etc.) and implement the based" view). The broad-based view, however, infrastructure and oversight needed to make those simultaneously recognizes the need for consolidation in services sustainable. the sector. · Initiate a vision-building process. AMFIU should seek donor technical and financial support and take Both views are consistent with aspects of the original shared stakeholder vision. Yet, pressure from the the lead in garnering the support of all stakeholders presidency to expand outreach in rural areas has fueled to define a process to look at the current vision and a major divide between these two approaches. Under address existing gaps. In so doing, all stakeholders fire to provide results, proponents of each side have can build on the energy and processes used in become entrenched in their positions, certain that their way is the only right one. Energy that could be passing the MDI Act. channeled into finding innovative ways of providing more · Engage an expert facilitator for this process. and better financial services in rural areas is instead being spent instead on finger pointing and villianizing the Experience shows that a skilled, outsider facilitator other side. This stance has reduced the focus on the can be critical in helping to bring together diverse actual challenge at hand: serving rural clients. views and maintaining a focus on desired Difficult questions avoided. Difficult questions about outcomes. Again, AMFIU could coordinate the the future of the microfinance sector were not recruitment of such a facilitator. addressed directly and openly, and have begun to · Learn what a pro-poor financial system entails. exacerbate divisions among stakeholders and make In preparation for updating and expanding the consensus difficult. These questions include: vision, all stakeholders (including MFF, AMFIU, 1. What is the best strategy for reaching the rural PSDG) should draw on resources in Uganda, as microfinance market? well as experiences elsewhere (e.g., Tanzania) to 2. What financial products and services beyond small learn the basics of a pro-poor financial system and loans are needed to finance agriculture, a sector to map out what such a system might look like in that employs over 80 percent of the labor force?13 Uganda.14 The finance subcommittee of the MFF 3. What is the appropriate level of engagement with should take the lead in engaging a wide cross the cooperative sector? section of government staff on this issue. As the 4. How can the MOP be managed appropriately? 14A good source of information on pro-poor financial systems will be provided by new donor guidelines that are currently being drafted to replace the 1995 " Micro and Small Enterprise Finance: 13Ministry of Agriculture, Animal Industry and Fisheries, PMA, v. Guiding Principles for Selecting and Supporting Intermediaries." Uganda Microfinance Effectiveness Review Page 12 representative of large and small MFIs, AMFIU 3. Prioritize rural finance as a major issue to be should educate practitioners, making a special tackled jointly. effort to also reach commercial banks and cooperatives. Finally, the PSDG should organize a · Place rural finance explicitly on the agenda of the forum for donors to discuss the implications of apex/PMA subcommittee. One responsibility of the taking a financial systems approach to apex subcommittee of the MFF is advising the microfinance and the development of the financial Program on the Modernization of Agriculture on sector as a whole in Uganda. rural microfinance. The subcommittee may wish to task a working group with developing a medium- 2. Codify, disseminate, and regularly update the term plan that lays out the responsibilities of all new vision. actors in the financial system to reach rural microfinance markets, including exploring how the · Write new principles for supporting microfinance resources of the MOP can generate the greatest in Uganda. The new principles written to replace leverage. The plan should include a focus on the 2001 donor principles should address all savings-led strategies. Working group members financial system stakeholders, with specific should have the appropriate technical expertise to guidance on the appropriate roles of government, work on this issue. practitioners and donors. For example, concrete guidance for practitioners might include ways to · Separate out the specific challenges of improve efficiency; donor guidelines could focus agricultural finance from the broader rural on how donors should complement and not replace finance issues and work on finding solutions to private capital; and guidance for the government these distinct issues. For agricultural finance, invite could address the importance of cost-recovering stakeholders from outside the microfinance sector interest rates. to take the lead on discussions, building on the recent BOU-commissioned study on agricultural · Organize workshops/meetings to present the finance to identify solutions to the breadth of principles. Once it is finalized, buy-in to the vision existing constraints. Also, the Agricultural Sector will require a continued consultative process. Donor Group and the PSDG should organize joint Special care should be taken to reach smaller MFIs meetings to plan for the implementation of the outside Kampala and the SACCOs, as well as PMA rural strategy. parliamentarians. The packaging of the final · Develop criteria for identifying promising rural document is important: it should be kept short and institutions. Identifying the next generation of "top clear. winners" will be important for increasing outreach · Orient new staff among all stakeholders to the in the rural areas. While many small institutions vision and its implications. Once the vision is are unlikely to ever reach scale and have adopted, AMFIU, the Ministry of Finance, and the significant impact, establishing an operational, PSDG should ensure that new representatives of user-friendly analytical tool to identify those their respective stakeholders (new MFI directors, institutions that do serve a niche market well and new donor staff, and key government staff could grow would be a useful contribution. assigned to microfinance) are apprised of the AMFIU, with donor support, could be charged principles and objectives of the vision. with this task. · Establish a rotating "ombudsman" function · Promote the role of savings as a service and a within the MFF (perhaps within the apex source of funding for rural MFIs. In addition to subcommittee). To ensure that specific problems protecting poor people's savings (see below), the and/or new ideas are aired early, stakeholders industry should focus on the creating appropriate could benefit from designating a person to hear savings products for rural clients. MFIs could requests to add topics to the main agenda of receive assistance for this through the MOP, while collaborative mechanisms. The responsibility for donors, AMFIU, and others can support better this function should be rotated regularly to ensure practices, governance, and oversight for savings maximum neutrality. mobilization. 4. Protect poor people's savings. · Explore joint oversight of SACCOs by the BOU/MoFPED and the commissioner of Uganda Microfinance Effectiveness Review Page 13 cooperatives that would meet the definition of significance (such as the number of savers or size of deposit base). Joint oversight responsibilities 6. Map out the respective roles of all stakeholders in must inc lude the ultimate power to disband a developing a pro-poor financial system. SACCO or install new management, plus the · Build on this report to complete a pro-poor skilled human resources to identify mismanaged financial system template. The Ministry of institutions. Joint oversight, together with the Finance, AMFIU, and PSDG should distribute the requirement for international good practice financial sector development template included in standards in the microfinance and co-op sectors, chapter VI to all stakeholders so that they can should be included in the new co-op law. For identify the services and locations that they are example, the law might include a reference to the currently providing or funding at all three levels of use of PEARLs or other such systems to increase the financial system. A donor member with the transparency. appropriate resources and expertise, such as · Create a savings subcommittee or working group DFID's Financial Sector Deepening Unit or GTZ, to provide leadership specific to the safety of should then compile all the templates and present savings. The existing Tier 4 Regulation Group the findings. (formerly the SACCO Regulation Working · Devise strategy to rectify donor overlaps and Group), convened by the MOP, is an ad-hoc gaps. A respected member of the microfinance working group with too broad an agenda for this community with the right technical and people urgent specific task. An agenda for the savings skills should be identified to lead a discussion to subcommittee might include tier 4 regulation in address areas of overlap and gaps, and to propose partnership with the MFF's lobby subcommittee; solutions. An example of a specific gap is the lack strategic alliances between commercial banks and of product development to meet the varied needs of tier 4 institutions to keep savings safe; a program microfinance clients. with the MFF consumer affairs subcommittee to educate potential savers about safe SACCOs (i.e., 7. Be proactive where politics and microfinance members of Uganda Credit and Savings intersect. Cooperative Union or Uganda Cooperative Association networks that adhere to minimum · Accept that microfinance is part of the national standards). debate about poverty reduction. All stakeholders should recognize that it is reasonable for the government to be keenly interested in the rapid 5. Position MOP coordinating unit clearly within expansion of microfinance, given its significant the microfinance sector. potential to contribute to poverty alleviation. The The role of the MOP in the microfinance sector, and problems come when politicians move out of their with regard to individual donor projects, merits oversight role and abandon or neglect other clarification. Its role as resource center of sorts to poverty alleviation efforts in the hope that the entire industry should be spelled out clearly, microfinance will "do it all." including how it will collaborate/complement · Correct assumptions about microfinance being a ongoing donor activities. The MOP should be more panacea for poverty. AMFIU should launch a transparent about its operating principles, such as public information campaign about what how the money for financial extension workers will microfinance is and is not, and what it can deliver be spent, minimum qualifications of MFIs eligible for Uganda. This task is time-sensitive--those who for the MCAP matching-grant facility, and the believe that microfinance is a panacea may become limits to the support of non-sustainable institutions disappointed soon and could withdraw public through MCAP. It is recommended that the MOP support from the sector. Key messages might retain the flexibility to be responsive to market include: (1) microfinance is just one tool for needs and ensure sufficient technical oversight of poverty alleviation; (2) microfinance is not the projects and institutions it funds by working appropriate for all people and in all situations-- with qualified donors or support projects, or hirin g other development interventions may sometimes consultants with sufficient authority and expertise. be more appropriate; (3) microcredit interest rates are based on the high costs of loans for poor people and the financial system; and (4) microfinance is about the long-term, sustainable provision of Uganda Microfinance Effectiveness Review Page 14 financial services that poor people need, including deposit services, insurance, and transfers, not just credit. Consult the Key Principles of Microfinance developed by CGAP and endorsed by the G8 for additional messages. · Reach out to politicians to pre-empt the use of microfinance as an election issue. AMFIU should educate politicians about the appropriate oversight role for lawmakers in developing a pro-poor financial system and the "polluting" effects of using microfinance as a tool for resource transfers. · Establish procedures for rapid industry reaction to political (and other) challenges. AMFIU should set up a quick response committee to react quickly to political statements or initiatives that might undermine the microfinance market or misrepresent the sector. A transparent and coordinated approach to responding to such statements should maximize the chances of effectively lobbying the government and reaching acceptable alternative solutions. Uganda Microfinance Effectiveness Review Page 15 IV. DRIVER NO. 2 SKILLED HUMAN RESOURCES Skilled experts work in all stakeholder groups (local Support Project) that provides near market-rate loans to MFIs, the government, technical services providers, and qualified MFIs; AFCAP's consultant certification and donors). Sharing a common vision and a baseline training; and USAID's SPEED project, which supports agreement on good practice principles, they work the transformation of large MFIs into MDIs. together constructively for the benefit of the microfinance market. The high level of technical skills Box 7. The SPEED Project of USAID across all stakeholders also creates a demanding One part of the SPEED project is to ensure that the top environment in which each stakeholder always wants to three to five MFIs in Uganda transform into formal sector do better and is ready to argue fiercely for their beliefs. MDIs. To achieve this goal, SPEED provides substantial training and international technical inputs in the areas of Ugandan microfinance is a dynamic intellectual liquidity management, asset and liability management, community that is attractive to global microfinance market research and product development, ownership and specialists and Ugandans. Ensuring the continuity and governance, internal controls, and information systems, depth (i.e., reaching middle management) of this among other topics. community remains a challenge for the future. Missed Opportunities Successes Lack of industry-wide supply of training after the Virtuous circle of local and international specialists. PRESTO project. Stakeholders no longer have an Across all stakeholders, top-quality people with solid industry-wide supply of training (even though partial technical skills are in place. In the government, funding is available for MFIs to access good local technocrats are assigned to follow microfinance and training). There is no strategic development of new have complemented their financial skills with training content to keep pace with the increasing microfinance training at the Microfinance Training complexity and growth of the sector, and there is no Program in Boulder, Colorado (USA), and other mechanism to ensure depth of training among the international events. Leadership of MFIs includes well- various stakeholder groups. This vacuum in the trained Ugandans and internationals with private sector availability of good practice training after the PRESTO and banking experience. Highly qualified international project ended was due to an unfortunate succession of technical service providers are also present in the donor decisions, outlined in box 8. The Microfinance country. And while the availability of local support Competence Centre tried to carry on the PRESTO services in Uganda is still limited, there are a growing training, with modest results, and a few high-quality number of high-quality local consultantsprimarily courses and consultants were available due to training of people with expertise that have left other stakeholder trainers workshops offered by AFCAP. But fees for groups. Specialists also seem to trade places frequently these workshops were too steep for local MFIs that were in Uganda. It is not uncommon to see government not yet weaned from subsidized training. The training employees move to MFIs, MFI managers taking jobs currently available in Uganda tends to be either highly with donors, and donor staff joining the government. specialized and offered by international consultants (directed to top-tier MFIs) or rather basic and limited Excellent training and technical assistance. Industry- (directed to smaller MFIs). Not much is available for the wide training provided the sector with a common middle management of growing MFIs. The MOP language and principles, giving microfinance a running coordinating unit contains a mammoth human resource start in Uganda. The PRESTO project is credited as one training component, designed to step into the breach and of the most important factors in the development of provide industry-wide perspective and training.15 successful microfinance in Uganda. Its CMF, a one-stop However, its courses have yet to get off the ground. shop for microfinance information and training, came to be regarded at the time as the "gold standard" for Little specialized training for growth. Virtually no training projects. Subsequent training projects have training currently available in Uganda (save that for top- moved from a supply-led to a demand-led approach and tier MFIs) is specifically designed to help MFIs face the focused on specific areas of need or on the achievement of specific goals, such as the EC's SUFFICE capacity 15This includes both the capacity building unit, which is building component's partial subsidy of training, which commissioning materials and seeking to certify trainers, and the MFIs identify as useful; the AfDB's Microfinance Microfinance Capacity Building Program (MCAP), which is Support Center, Ltd., (formerly the Rural Microfinance currently in international tender and will provide matching grantsfor training and technical assistance. Uganda Microfinance Effectiveness Review Page 16 multiple challenges of growth, such as portfolio and individuals. For the long-term sustainability of accounting systems for a large branch network, internal microfinance in Uganda, this problem is most acute with controls, or maintaining a high-quality portfolio while regard to local capacity. Most leaders are not preparing expanding and cutting costs. Most consultants and local others to take over once they move on (although Women service providers have managerial and institutional and Microfinance Uganda has an explicit mentoring development capacity, but lack the specific technical goal). If a few well-placed people were to leave, the skills to help MFIs move into the financial mainstream. ongoing development of microfinance would be As two independent groups of MFIs admitted, many seriously affected. MFIs are handling growth by trial and error. There appears to be no local service provider capable of Recommendations assisting middle-tier MFIs with issues of financial system development or transformation. This fact is 1. Continue investing in capacity building across all unsurprising, given that there has been no significant stakeholder groups. sector-wide investment in technical service providers · Invest in training people regularly, especially since 2001. local staff. The investment in sending people to training programs, exchange visits, etc., has Box 8. No Effective Successor to PRESTO clearly paid off in Uganda. As microfinance PRESTO was a project designed for an emerging industry evolves and financial institutions grow and offer - the Centre for Microfinance (CMF), for example, was more complex services and products, constant never intended to be permanent. Although the apex professional development is necessary across all subcommittee of the Microfinance Forum proposed an stakeholder groups. For example, SACCOs require independent CMF II, USAID thought it would be more training on record keeping and financial efficient to merge the CMF with the GTZ plan for a Microfinance Competence Center (MCC) in the Ugandan management; BOU supervisory staff need to better Institute of Bankers. The merger would bring training and understand how to implement the MDI Act, and policy work together in the MCC, which would have the donor staff need a better grasp of financial sector mandate to update and expand training and technical development issues, beyond retail-level work. services provided to MFIs and to offer additional training of trainers, as well as courses for the Ugandan government · Highlight importance of "succession planning." officials and donor staff. It was assumed that this All stakeholders groups should actively champion combination of services would attract other donors. In accordance with this assumption, the CMF turned over its the need to develop capacity beyond top materials, equipment, and database to the MCC with little management. They should also prepare a transition or actual donor support. succession/transition plan for key positions. For example, AMFIU should stress the importance of When USAID was preparing its next project, the design team understood that other donors would fund the MCC early succession planning with it membership. and there was no need for USAID funds. USAID thus Donors should build in overlap time when key chose to focus on the niche of transforming MFIs to local office or project staff leave the country so regulated financial institutions (the SPEED project). The that they may orient and pass on institutional EC's SUFFICE capacity building component was a demand-led project that primarily provided subsidies to memory to the newcomers. MFIs seeking to attend MCC trainings. GTZ provided · Keep up support for an associate bachelor's support for a business plan and the development of two new courses, and DANIDA gave support for staff salaries. degree program. GTZ has supported the GTZ ended support when MCC's new products and development of an associate bachelor's degree governance were found lacking. program in microfinance and community development with an Africa-wide focus, that Unfortunately, no donor became truly committed to the MCC, therefore none was committed to technical combines distance learning modules with a series oversight. Although DANIDA stepped in to sustain the of 1-2 day workshops held during the residential MCC, they did not commit the technical resources or periods. Based on initial positive reviews, this oversight needed to oversee the development of a true program is worthwhile. However, to provide hard Microfinance Competence Centre. Patchwork funding is insufficient to build such a center from scratch. Today, the skills to practitioners, the curriculum could be MCC offers only 10 subsidized courses, most of which are more technical and analytical, rather than broad adapted from PRESTO trainings, and few technical and theoretical. services. · Support the development of AMFIU. As a broadly representative association, AMFIU has the Skin-deep human resources across all stakeholders. potential to be a major contributor to development The dynamic public face of microfinance in Uganda is, of the sector. AMFIU is still fairly young and for the most part, only "skin deep." Middle management requires support from its members and donors in is not well developed and all stakeholders are overly order to expand its own capacity to take on this dependent on a few high-profile and often over-stretched role. In doing so, donors and members must Uganda Microfinance Effectiveness Review Page 17 recognize that their support should not 3. Reorient financial extension workers to provide compromise AMFIU's independence as a voice financial management training for community- for the industry as a whole. based organizations. 2. Maximize the capacity building efforts of the · Offer basic financial management training. outreach plan. Many grassroots community-based organizations, including SACCOs, urgently need basic financial · Put in place MOP staff with technical expertise management training. The MOP currently calls for and political independence. Donors funding the the deployment of financial extension workers to MOP and the responsible government officials create linkages between clients and MFIs. Many should ensure that the MOP's capacity building stakeholders are concerned that this approach may efforts are managed by staff with appropriate skills not be judicious. A possible, more effective use of and independence to design, implement and financial extension workers would be for them to prioritize capacity building efforts effectively. provide consumer education training that MOP staff should proactively collaborate with emphasizes the rights and responsibilities of MFI other capacity building programs in the sector to clients, as is currently envisioned by the consumer leverage opportunities and minimize redundancy. education subcommittee of the apex subcommittee · Create and regularly update the inventory of of the MFF. training and technical services. As an information center, the capacity building unit 4. Focus practitioner training on efficiency, governance, and accountability. under the outreach plan coordination unit should maintain a list for the whole industry of all locally · Emphasize efficiency, good governance, and and internationally available training and technical accountability. All donors should work closely with services of relevance to microfinance. Optimally, the MFI partners they fund to improve work this database should also include a standard processes and systems for increased efficiency and assessment of these training resources. sustainability, governance for better safety of funds, and accountability for maximizing the return on · Identify long-term "home" for training courses. capital. Focusing on these core areas will help MFIs The outreach plan's curriculum development position themselves in an increasingly competitive subcommittee should search for long-term partners environment, prepare for MDI licensing, and operate to help design course materials and provide with reduced donor subsidies. permanent homes for the courses that are being developed. Possible options include universities, · Promote AMFIU's role in supporting MFIs in core areas. AMFIU has a great opportunity to provide business schools, or training centers. leadership and added-value services by offering performance benchmarking to its members, building on the performance monitoring tool and the forthcoming performance monitoring system (a financial data collection and benchmarking tool). AMFIU could also provide briefing notes on what constitutes good governance for a range of institutional types. Finally, AMFIU could broker information that MFIs may need to increase their efficiency, such as announcing the newly created CGAP product costing tool for practitioners.16 16For more information on the product costing tool, see www.cgap.org/productcosting. Uganda Microfinance Effectiveness Review Page 18 V. DRIVERNO. 3 INTENSIVE STAKEHOLDERCOLLABORATION Stakeholder collaboration is rightly considered a The People Factor (Who Is Involved?) success story in Uganda and has been a major driver of effectiveness in the industry. Collaboration in Uganda · Qualified personnel. The participation of highly goes beyond donor organizations and includes all qualified people from all stakeholder groups made stakeholders groups. Interviews with stakeholders meetings and collaborative initiatives dynamic and confirm that collaboration in the past five years has results-oriented. Individuals engaging in been extraordinary and they give it high marks for its collaborative efforts can only be effective if they effectiveness and the positive participation of are qualified, have some technical background, and MoFPED and BOU. have made some effort to be informed on the issues at hand. AMFIU's leadership, for example, At the same time, it appears that the close sense of is extremely well-versed in both microfinance and partnership among stakeholders is beginning to fray. larger financial sector issues. Each of the stakeholders expressed exasperation that · Sufficient committed personnel. Stakeholders the others are not being transparent. Such frustrations must make collaboration part of staff members' job are a natural part of any relationship and can be healthy descriptions. In Uganda, several donors (including if they result in a deeper dialogue. They are also the the EC) explicitly incorporated collaboration into effect of the expansion of the microfinance sector from the terms of reference of their staff and/or project a cohesive small group of stakeholders to a much staff. Stakeholders without sufficient staff often are broader set of players who are outgrowing the existing unwilling or unable to regularly attend key methods and mechanisms of collaboration. If these meetings. The level of staff commitment is equally frustrations are not addressed, however, they can important. This is particularly true of stakeholders undermine partnerships, trust and, ultimately, the who are not only focused on microfinance, but possibility for effective collaboration. manage a larger portfolio of development projects. Much has been written on donor collaboration in · Local representation. Collaboration works best in Uganda and elsewhere. The purpose of this section is country. Lack of sufficient local representation to look at collaboration among and between all hinders the numerous informal and personal stakeholder groups (including practitioners and interactions that contribute to effective government), not just among donors. The section also collaboration. Not surprisingly, several of the highlights specific collaborative mechanisms and donors most active in collaborative efforts are attempts to identify the key factors that contributed to highly decentralized. For example, DFID, EC, their effectiveness. A description of three specific USAID, and GTZ all have separate, independently mechanisms that have been important for stakeholders managed projects dedicated (in part) to (the MFF, AMFIU, and PDSG) is included, as is a microfinance. brief case study comparing two collaborative efforts. · Presence of decision makers. Collaboration is best when the participants are decision makers or can Factors Contributing to Good Collaboration significantly influence the decisions of their Individual conversations and focus group discussions organizations. If decision-making authority is confirmed David Wright's conclusion that limited or in the hands of a distant office, extra collaboration is critically dependent on the individuals effort must then be made to inform and involve the involved.17 Two additional factors emerged as being true decision maker. The fact that the Ugandan equally important, namely, the nature of a given issue government was represented at a senior level in and the structure or the process of the collaborative forums like the MFF certainly gave that body more mechanism. For each of these three contributing standing and influence. factors, several key aspects of the Ugandan experience · Practitioner involvement. A common are critical. denominator of a number of successful collaborative efforts was the active participation of 17For more information on David Wright's framework for MFIs themselves, both directly and through analyzing donor coordination, see Wright, In-Country Donor AMFIU. While donors or donor project staff can Coordination. Uganda Microfinance Effectiveness Review Page 19 effectively act as agents of the organizations they more generally address collaboration and support, direct MFI involvement seems to lead to a exchange). The way that all stakeholders broader acceptanceof the final outcome. galvanized the drafting and passage of the MDI · Role of champions. Specific individuals are Act is a striking example. identified early on as champions of certain issues · Shared interest. Not surprisingly, collaboration is and play a key role in moving the issue forward. easiest when the benefits or outcomes are widely Stakeholders mentioned the need to get the shared. With respect to the joint donor reporting champion's support for an issue at the beginning, tool (the performance monitoring tool) that was usually through informal contacts. adopted by all donors to receive regular reports from their MFI partners, all stakeholders stood to Box 9. GTZ/Sida Collaboration benefit from a reduced administrative burden, consistent reporting, and increased transparency. When Sweden opened its embassy to Uganda in 2001, it sought to make effective use of its limited aid resources. · Good understanding of concepts and priorities. Sida developed its strategy for support of the Ugandan private sector in line with the priorities laid out by the Developing a shared interest in an issue results government of Uganda in its Medium-Term from stakeholders' understanding of the concepts Competitiveness Strategy. Working with the BOU was a and priorities. Collaboration usually begins with natural choice, given its key role in the MTCS "priority education of stakeholders on this issue, often by actions" to strengthen the financial sector and increase the champion(s). access. However, only 20% of Sida's private sector budget and staff time was available for a financial sector · Pro-active approach. In the Ugandan context, project (approximately US $3.2 million over three years). Through the PSDG, Sida identified GTZ as the primary stakeholder collaboration appears more successful donor agency working with the BOU and saw the when initiated by interested stakeholders who seek possibility to increase its impact by collaborating with the to move forward a specific idea or vision. existing GTZ Financial Systems Development project. Collaborative efforts that are perceived as defensive, i.e., to stop an action, are more likely to The BOU also preferred that Sida work through the fragment collaboration and lead to discord. An existing GTZ support structure, rather than create a new project office. Through complicated negotiations, Sida example is the MOP, originally designed to contracted GTZ as its implementing agency. Rather than counter a presidential statement rather than to pool funds, Sida chose to fund certain activities of the implement a shared vision. Champions play a role project, which were budgeted and accounted for in setting either a proactive or reactive tone to the separately from GTZ activities, but managed by GTZ conversation. technical staff in the BOU. The separation is virtually invisible to stakeholders not directly involved in program management. The Process Factor (How Do We Work It All three partners are satisfied with this successful Out?) collaboration. Lessons learned include: · Some structure. Informal contacts are vital to the · Maintaining distinct funding sources for project development of ideas and maintaining the activities has increased the cost of monitoring and reporting. A basket approach to funding might be momentum of collaborative efforts, but some preferable so that there is a single project budget minimal structure for collaboration is necessary to financed by multiple sources. get things done. MFIs individually could not have · Partners must understand their role from the engaged with the other stakeholders as efficiently beginning: silent partner, equal partner or lead partner. and effectively as they did via the representation of · Partners should negotiate with the decision-making AMFIU. parties to any agreement so it is clear when each partner's approval or consultation is required. · Open mechanism . If representatives of all · The funding cycles of the partners need to be stakeholder groups are present, it is more likely the addressed so that the project is prepared for the collaboration will result in a sense of ownership. possibility that one partner's funding may not be "Donor-only" or "government-only" discussions renewed. are appropriate for a number of issues, but often The Substance Factor (What Is the Issue?) result in misunderstanding or miscommunication · Clear goal. Issues get more attention if they have by other stakeholders who may be affected by the decisions of such discussions. a clearly defined outcome, desired by all involved. In such circumstances, even those stakeholders · Government access. Uganda is remarkable for the with limited staff make it a priority to get involved level of government accessibility to MFIs and (as opposed to the case of meetings and events that donor agencies and vice versa. If a mechanism Uganda Microfinance Effectiveness Review Page 20 provides access to government, it helps to solidify generally meets monthly to discuss both policy and the government's commitment to the industry. strategic issues, as well as to exchange information and · Recognized authority. If the mechanism has some discuss collaborative efforts. At the project level, the QCC brings together donor and project staff who are recognized political, financial, intellectual or moral directly involved in the implementation of authority, it is more likely to succeed. This is also microfinance projects to discuss issues at the MFI true of the leader or champion of the collaborative level. mechanism. The Ministry of Finance's chairmanship of the MFF certainly gave the forum Case Study of Two Collaborative Efforts: MDI Act an official standing. versus MOP · Transparency. Collaboration mechanisms must Two instances of collaboration are striking for their have some clearly understood rules of operation importance and the high level of interest that they and decision making Even if the rule is "no rules," generated among all stakeholders: (1) the development it is important for stakeholders to define how a and passage of the MDI Act in 2003, and (2) the group will make decisions, monitor progress, and development of the Microfinance Outreach Plan, which hold each other accountable for results. is still in the early stages of implementation. It is interesting to note that across all three factors that Three Collaborative Mechanisms contribute to effective collaboration (people, substance, This report focuses on three examples of collaboration: and process), the collaboration for the MDI Act one that is chaired by the government (MFF), another exhibited more positive aspects than did the MOP.19 that is run by the MFIs (AMFIU), and a third that is Stakeholders were eager to claim their part of the exclusively for donors (PSDG and Quarterly success of the passage of the MDI Act, whereas the Coordination Council). MOP has often been surrounded by controversy and discord. Microfinance Forum (MFF). The MFF has become the most important collaborative mechanism in Box 10. AMFIU: A Snapshot Uganda. The body resulted from informal contacts The vision of AMFIU is to be a strong and sustainable among some of the donors, larger MFIs, and the national network of all microfinance institutions in Ministry of Finance. It holds fairly regular meetings Uganda. The mission of AMFIU is to enhance the and acts as an information clearinghouse and, to some sustainable delivery of financial services by all degree, a gatekeeper.18 It has grown and developed microfinance institutions in Uganda. The objectives of AMFIU are: several committees (working groups) to deal with 1. To enhance collective action by MFIs and other specific issues, including finance, capacity building, stakeholders for a conducive policy and regulatory lobbying, and most recently consumer affairs. With the environment for microfinance in Uganda. exception of the lobbying committee, these groups 2. To develop and strengthen systems for information meet fairly regularly to develop proposals and policies collection, analysis, and dissemination through for the sector. databases, print, and electronic media. 3. To strengthen the capacity of MFIs to deliver Association of Microfinance Institutions in Uganda appropriate and sustainable microfinance services to the economically active poor through coordination (AMFIU). Since 2001, AMFIU has grown to be a and organization of lateral learning workshops, respected national MFI network and an important thematic debates, exchange visits, and linkages with contributor to stakeholder collaboration. Stakeholders other organizations. attribute much of AMFIU's recent successes to the 4. To develop and operationalize a performance credibility, talent, and personalities of its chairperson monitoring system for MFIs that will set standards and and director. increase professionalism in the industry. 5. To strengthen AMFIU's secretariat in providing the Private Sector Donor Group (PSDG) and the required and mandated services to its members and the microfinance industry at large Quarterly Coordination Council (QCC). Donor collaboration takes place at two levels. The PSDG is a working sub-group of the Ugandan Donors Group, staffed by donor representatives responsible for private sector development, including microfinance. The group 19Representatives of all three stakeholder groups were invited to a 18Meeting frequency has been more varied recently, particularly focus group where they discussed both of these collaborative since the passage of the MDI Act. efforts and were asked to compare and contrast the two. Uganda Microfinance Effectiveness Review Page 21 Table 2. A Comparison of Two Collaborative Efforts MDI Act MOP People · Practitioner initiated (the big MFIs) · Donor developed (officially developed by MFF's apex Who? · GTZ, USAID/PRESTO, other donor subcommittee, but EU/SUFFICE and AfDB/RMSP lead agencies staffed by technical experts, the effort) World Bank as additional champion · Key donors, IFAD and UNDP, without local technical · MoFPED and BOU representation · AMFIU · AMFIU participated, but did not lead · Stakeholders made significant time and · Ministry of Finance acted as facilitator for MFF to meet staff available to work on issue with government of Uganda · Perception of little time to react Substance · Clearly defined goal of new legislation · Broad goal of outreach What? and regulation · Multiple issues addressed, combined into one plan · Shared interest to increase sound · MFIs initially unclear on benefits provision of financial services · Some donors mistrustful of government of Uganda · Did not require significant funds implementation · Involved significant public and donor funds Process · Proactive effort · Reactive: effort largely arose in response to president's How? · Much education of all stakeholders on speech policy and regulation of MFIs · Very small group of apex subcommittee members · BOU had authority to draft drafted it all · Practitioners lobbied the government · MFF had no formal standing, although the Ministry of directly and through AMFIU for passage Finance lent its support · MFF provided forum for discussion and · Individual MFIs consulted, but decision makers not part feedback of drafting · Access and involvement of government · Primary focus on winning internal government buy-in from president, prime minister, other ministers · Donors funded all efforts · Unclear process for addressing concerns and comments Uganda Microfinance Effectiveness Review Page 22 Collaborative Mechanisms: Successes This section highlights the successes of the three collaborative mechanisms in table 3. The three mechanisms have provided effective channels to promote microfinance good practices, define priorities for new micro-finance legislation, clarify the role of government in microfinance, and make available information and training on a range of issues affecting microfinance in Uganda. Table 3. Successes of Three Key Collaborative Mechanisms: MFF, AMFIU, PSDG/QCC Main Characteristics Successes MFF · Access: Provides MFIs and donor projects with direct · Serves as key forum for all stake-holders access to the Ministry of Finance and other stakeholders to address · Authority: Through its chairperson, a senior minister of · Provides a one-stop shop of "who is finance, decisions of the MFF often become the decisions of doing what," so all can be informed of the minister, even though the MFF has no formal mandate what is happening and avoid duplication to make decisions of efforts · Members: Open toall who wish to attend, but does not · Acts as guardian of "good practices" for require attendance the industry, e.g., the MFF held long · Expertise: Chairpersons and active members of most discussions with IFAD about a planned subcommittees are high caliber and often recognized rural finance project; these funds experts (and champions) in the field, both local and ultimately were redirected to support the expatriate MOP · Frequency: Meetings are held f airly regularly · Creates subcommittees to deal with specific issues in more depth · Information: Provides most stakeholders with official information and orients newcomers to the sector. Preserves · Played key role in advising the Ministry of the continuity of initiatives, many of which have outlasted Finance and BOU on the policy their original champions statement for microfinance and the MDI Actall stakeholders coordinated their · Flexibility: Mechanism is not rigidly defined and allows for technical inputs, consultation and new issues to be addressed as they arise lobbying efforts via the MFF AMFIU · Access: Represents practitioners to parliament, the · Lobbies effectively on key microfinance president, and the Ministry of Finance issues, chairs the lobbying committee of · Authority: Recognized as voice of all practitioners the MFF · Activities: Activities are clearly linked to an articulated · Trains MFIs on performance monitoring mission and objectives · Assists the MOP coordinating unit in · Members: Nearly 100 members, which include the largest developing district microfinance MFIs, small MFIs, a bank, and SACCOs. Members pay dues committees and are therefore vocal in requiring results · Works with Ugandan government to · Oversight: Board is active and committed to overseeing propose the best regulatory solution for AMFIU, plans for its future tier 4 institutions · Expertise: Professional, well-respected manager · Takes a pragmatic approach and opts out of certain activities for which it is not well- · Flexibility: Stable funding, including coverage of operational suited, e.g., management of a credit expenses by a single donor,* not forced to pay overhead by bureau and direct provision of training taking on projects, so it can choose projects freely services PSDG/ · Access: Direct access to government counterparts, · Promotes good practice in project design QCC particularly Ministry of Finance and implementation · Authority: Donors provide over 50 % of the Ugandan · Brokers deals between donors to basket government's budgetary resources fund or jointly fund projects (e.g., GTZ · Presence of Decision Makers: Representatives often have and Sida collaboration) the power to make or guide decisions on policy and funding · Discusses respective strengths of donors · Instruments: Diverse and appropriate and implications of how to support projects · Scope: Covers private sector development topics · · Monitors donor-funded institutions to Membership: Donors only , closed to others prevent double funding and ensure compliance with donor agreements · HIVOS has provided AMFIU with approximately US $150,000 for a three-year period covering the duration of its current business plan; GTZ has also provided 500,000; and SPEED, SUFFICE, and other donors have provided funding for specific initiatives and projects. Uganda Microfinance Effectiveness Review Page 23 Collaborative Mechanisms: Missed Recommendations Opportunities The following recommendations build on the This section highlights the missed opportunities of the remarkable collaborative successes in Uganda to date. three collaborative mechanisms in table 4 below. 1. Place accountability squarely on the collaborative Notwithstanding the successes achieved via the agenda. mechanisms, they have fallen short in several areas, most particularly with regard to transparency and · Consider an annual peer review process. There is accountability. Also, incentives for participating in the a great deal of "buzz" about the successes of collaborative mechanisms could be made clearer and microfinance in Uganda. Clearly, the sector has information flows improved. benefited from significant amounts of public money. To ensure both that funds are maximized Table 4. and the growth of the past five years is magnified, Missed Opportunities of Three Key Collaborative the MFF could provide a forum for each Mechanisms: MFF, AMFIU, PSDG/QCC government and donor agency to present its contribution to the development of microfinance in Missed Opportunities Uganda, as well as it future plans. Stakeholders MFF · Insufficient clarity on the mandate and role of might also consider using an annual peer review subcommittees in technical advice and decision process to evaluate their strengths and weaknesses. making · No process for officially approving decisions 2. Clarify the role of the MFF. leads to perception among a minority of stakeholders that the MFF is used for "rubber · Decide on primary function and mandate of the stamp" approval, as well as confusion about subcommittees. The MFF must clarify the role of what decisions have been "consulted" the subcommittees in providing technical advice · Few checks and balances on subcommittee and decision-making for the industry. If the chairpersonsthey have significant control over subcommittees have a decision making role, the process and outcome of the work assigned guidelines as to how decisions are made and how to them recommendations are presented to the Ministry of · Unfunded mandates are not uncommon, e.g., Uganda Capacity Building Programme, was Finance are needed. designed by the MFF but was unfunded until it · Establish a regular meeting schedule and a was incorporated into the MOP strategy process for putting items on the agenda. To AMFIU · Not much success in promoting standardization ensure that the MFF can serve as a useful · Incomplete development and implementation of collaborative mechanism for all stakeholders on all the performance monitoring system , a data issues, a transparent process for determining collection tool and database for MFI financial data meeting schedules and agendas should be · Unresolved conflict of interest between developed. Otherwise, the MFF is vulnerable to promoting member interests and monitoring being bypassed when contentious issues arise, such member activities as the MOP. PSDG · Lack of microfinance expertise of participants; · Nominate an ombudsman. The MFF should they occasionally do not have a good nominate an ombudsman with the power to address understanding of issues at hand or the projects funded by their agencies the concerns of members who feel that either the · Sporadic contact with other stakeholder groups, consultative or decision-making process is not especially practitioners, due to closed consensual or transparent. membership · Ensure appropriate funding. Prior to mandating · Insufficient transparency (whether perceived or real) about decisions taken; poor or no any activity to be undertaken by a member of the communication to others MFF, the forum should determine and confirm the · Serious reservations about the MOP were not availability of appropriate funding. Mandating necessarily formulated with a full understanding activities that are never implemented, such as the of the motivations of the Ministry of Finance. Uganda Microfinance Capacity Building QCC · Potential of QCC is underutilized due to poor Framework, undermines the credibility of the MFF attendance of key donors and project managers and disperses the efforts of individual members. · Perception by leading donors of others' unwillingness to share information openly Uganda Microfinance Effectiveness Review Page 24 3. Incorporate collaboration into all leading 4. Find creative ways to engage absentee donors in stakeholder job descriptions. the key collaborative mechanisms. · Integrate collaboration as a task in all · Designate local representatives. Centralized donor stakeholder job descriptions. Collaboration should agencies without a local presence or sufficient staff be included in the job descriptions of all should designate a representative to participate in stakeholders, especially donor staff, selected collaborative mechanisms on their behalf. government representatives, and practitioner · Meet regularly with representatives of key representatives such as AMFIU. Although no fixed collaborative mechanisms. When staff from norm can be pre-determined for all, 10 percent of an individual's time would seem appropriate as an donors with no or little field presence travel to average. In the case of donors, leading agencies Uganda, they should make a special effort to meet with the most technical capacity would probably with a wide cross section of relevant stakeholders, require more time. Annual performance including representatives of the main stakeholder evaluations should also take into account the staff collaborative mechanisms. contribution to enhancing collaboration. Because · Plan for channels of communication. The MFF both informal and formal networking are so ombudsman should promptly bring concerns important in Ugandan microfinance, it cannot be and/or complaints about absentee donors to an left to chance that stakeholder representatives will agreed person in headquarters. With the authority have the time and incentive to collaborate. of the Ministry of Finance, the ombudsman should address issues raised at the MFF about the quality of their programs. Such a system may also be considered for donors with representation in the country. Uganda Microfinance Effectiveness Review Page 25 VI. THE DONOR ROLEANDTHE USE OFSUBSIDIES The sheer amount of international development particularly effective in promoting good practice assistance invested in the sector cannot be ignored in a informally. These champions can be best described as discussion of the success factors of Ugandan "connectors." Few and far between, they are persons microfinance. Knowledge of other countries indicates, who possess both excellent technical skills and the however, that money alone is not enough. Uganda is a right blend of persuasion and negotiation skills. They fortunate case where large amounts of money came move easily from one stakeholder group to another and with dedicated people with the right technical skills, a develop superb personal connections with government clear vision, and the foresight to work together to officials, MFIs, and other donors to discuss problems achieve greater impact. and good practice solutions. These connectors have taken on responsibilities well beyond their own duties. Yet to meet the promise of a fully developed They act as chairpersons of MFF subcommittees, microfinance market that is integrated into the financial leaders of ad-hoc working groups, and sponsors of system, donors (and, indeed, all stakeholders) cannot numerous unofficial educational and networking rest on their laurels. Especially at a time when grant events. funding is less available and the commercial sector is taking a keen interest in microfinance, donors must Donors kept practitioners at the forefront. Although carefully define their role and priorities in Ugandan several Ugandan stakeholders confirmed that "behind microfinance. most things in microfinance, you will find a donor," donors have sought to be responsive to the expressed Successes needs of MFIs and to keep practitioners at the forefront of all major initiatives. MFIs in Uganda have had a Donor money plays a big role in Ugandan fairly powerful voice. In the 1990s, many of the major microfinance. The top donors (DFID, USAID, EU, MFIs benefited from the presence of onsite and GTZ/KfW) to Uganda in the past four years are international specialists, who facilitated interaction also the top microfinance donors, making them deeply with donor repres entatives. Today, almost no MFIs invested in the success of microfinance as a part of the have onsite expatriate managers, but their level of country's overall development. More than US $40 interaction with donors remains high. In part, this is million in international assistance has been invested in due to AMFIU. Whereas the MFIs created AMFIU, the sector from 1999-2003, including nearly US $20 donor financial and political support made AMFIU a million in direct support to MFIs, which has been one strong spokesperson for MFIs. Donors have worked of the reasons behind the fast growth of the sector. closely with AMFIU and supported it to become a vocal participant in key activities, such as the MDI Act Technical oversight accompanied donor money. and the more recent tier 4 discussions. From 1999-2003, most of the money flowing into the sector was passed through well-designed donor Missed Opportunities projects staffed by specialists, both local and international. As a result, Uganda has a strong set of Inadequate application of performance-based top-tier MFIs with the potential to become regulated mechanisms for donor subsidies. Overall, there is a institutions. When large donors without on-site consensus that donors in Uganda have done well, technical managers wanted to enter the market, perhaps better, than in many other countries. But there specialists, other stakeholders worked diligently to is also a sense that donors could have achieved more build in adequate technical oversight of their funds. with the investments that were made. Several close When DFID's Financial Sector Deepening Unit and observers of donors in Uganda noted that many were MOP saw SPEED had a comparative advantage in not focused on ensuring the maximum impact of their managing the transformation of MFIs to MDIs, they funds. Specifically, some donors put money into MFIs decided to ask SPEED to manage their transformation that will never be sustainable and are not contributing funding. to either outreach or innovation. Other donors gave grants to MFIs, instead of helping them get access to Donor champions (the "connectors") were commercial financing. As donors continue to be particularly effective behind the scenes. Donor attracted to Uganda, it is now necessary to ask how champions with credibility across all stakeholder donor fundinglike the recently approved US $25 groups (often representing strategic donors) have been million loan from IFAD to the governmentcan move Uganda Microfinance Effectiveness Review Page 26 beyond a "do no harm" approach to complementing financing. Not every donor should or can domestic capital flows. intervene at every level of the financial system. Donors should assess their individual strengths, Insufficiently broad vision of financial system perhaps using the five core elements of donor development. As noted in chapter III, all stakeholders effectiveness that emerged from the 17 have a narrow vision of microfinance. With regard to microfinance donor peer reviews, to understand donor support, this narrow vision translated into where they can add value.20 For example, a donor programmes and projects that did not pay enough with limited technical capacity and grant funding is attention to developing the industry infrastructure ill-suited to provide institution-building support. ("meso level"), which is vital to a flourishing Donors should align their operations to their microfinance sector. Also, while donors invested a lot respective comparative advantage. at the policy level, little has been done to protect the savings held in SACCOs or to help strengthen their · Be transparent about funding decisions. Given systems for accountability. the interrelated nature of the industry, stakeholders should have input on a donor's funding decision if Lack of engagement with the outreach plan. The it can lead to significant market distortion. Donors microfinance outreach plan has been the source of should be able to justify their support of one MFI much frustration and disappointment to much of the to its competitors. donor community. Many donors felt sidelined during · Use performance-based funding and benchmark the development of the MOP and felt that the precedent MFI partners against regional best practices. of close collaboration and good practice microfinance, which has been central to Ugandan microfinance, had · Pair big money with strong expertise. The newest been abandoned. Rather than seek to understand the money flowing into the sector will be from IFAD government of Uganda's position and come to a and AfDB. IFAD has no local presence in Uganda, workable (even if second best) solution, many donors and AfDB has a single representative at present: remained entrenched in their positions. As a result, neither has strong technical backstopping capacity. their ability to negotiate effectively with the designers There is already concern among donors and MFIs of the outreach plan was greatly reduced. that the mechanisms that manage these funds (MOP and Microfinance Support Centre, Ltd.) are Non-existent agricultural finance strategy. The not fully appropriate or do not have sufficient strong focus on MFIs has obscured the much larger technical oversight. Donors with strong technical challenge of developing a financial service market skills should use their expertise to increase the appropriate for agriculture. Since the Program for the potential positive impact of these mechanisms. Just Modernization of Agriculture delegated responsibility as the World Bank has been selected to oversee for rural finance to the apex subcommittee of the MFF, IFAD funds, other donors could provide technical there has been too much emphasis on the potential of experts for specific projects or windows. MDIs to serve this market. The mushrooming number of cooperatives reflects the political imperative to work 2. Invest in developing local capacity. with farmers, but also the failure to address the · Prioritize building the capacity of Ugandans. significant needs of rural communities. Even now, the Ugandan microfinance has benefited greatly from focus on finding a solution to tier 4 regulation is taking the access to top-notch microfinance specialists, attention away from finding a solution to the both long-term advisors and short-term development of appropriate services and delivery consultants, including those who have provided mechanisms--something regulation will not solve. training and technical assistance. Yet, donor staff rotate frequently, and the cost of flying in experts Recommendations to Improve Donor to deliver one-off technical assistance is high. The Effectiveness very sustainability of microfinance in Uganda depends on the availability of Ugandans with the 1. Focus on comparative advantage and improve skills and experience to work in different transparency of decision-making on funding to stakeholder groups. While such people exist, they maximize the return of investment (social and are in extremely high demand, and many more are financial). · Work only in the areas where the donor has a comparative advantage in skills, history or 20Helms and Latortue, "Elements of Donor Effectiveness in Microfinance: Policy Implications." Uganda Microfinance Effectiveness Review Page 27 needed to meet the needs of the dynamic and Some examples of how table 5 might be used in the evolving microfinance sector. future include using the characteristics of donors active in Uganda to identify their respective comparative 3. Engage positively with the outreach plan, while advantages, as shown in the following examples: recognizing its risks. · The microfinance outreach plan coordinating unit is, · Collaborate to frame the role of the microfinance in one sense, a large donor with long-term vision and outreach plan in the microfinance sector. The political clout. It has a comparative advantage in risks of the MOP are many, including unclear making SACCOs safe places for poor people to save. accountability for results, the stifling of innovation It has already organized a working group to respond through a standardized training curriculum, and the to Parliament's mandate for tier 4 regulation and has possibility of inappropriate government the opportunity to go much further. involvement. The financial extension workers in the MOP exemplify these risks: they have · The Financial Sector Deepening Unit of DFID has ambiguous job descriptions and are accountable to private sector credibility and specialist staff, long- several different agencies responsible for term vision, and a range of instruments. It has a recruitment, training, housing, remuneration, and competitive advantage in building the infrastructure supervision. To mitigate these risks, donors-- of the financial sector, especially in leading the especially those with technical skills--should discussion about what it means to develop a pro-poor move beyond the debates linked to the MOP's financial system. genesis and development, and focus on defining clear boundaries that can frame its contribution to · The Stromme Foundation has high tolerance for risk, the sector. Given the numerous collaborative combined with grant instruments and a focus on mechanisms in Uganda, if donors choose to poverty. If they teamed with a donor with private constructively engage with the MOP, particularly sector credibility and specialist staff, they would through the MFF subcommittees, the time is still have a real competitive advantage in supporting the ripe to integrate it in a defined and positive manner development of better financial products for the rural into the overall microfinance sector. poor. As noted in the first recommendation above, donors can increase their effectiveness in building a pro-poor financial system in Uganda by focusing on their respective comparative advantage. Using the analysis in this report and earlier work done by CGAP, table 5 shows steps that donors can follow to identify their comparative advantage and then take the most effective action. Please note that this table is not comprehensive; it is simply one tool that donors can use to increase their effectiveness in building a pro-poor financial system. Uganda Microfinance Effectiveness Review Page 28 Table 5. Donor Action for Building a Pro-poor Financial System in Uganda 1. Key gaps in 2. Who should 3. Characteristics of 4. Recommended action for developing a pro-poor fill these donors best placed donors (including the financial system in gaps? to support this gap MOP) Uganda Financial § Insufficient institutional § MFIs, MDIs, § Private sector § Implement performance- intermediaries capacity to reach large and banks credibility and based financing with real (micro) numbers of poor people, specialist staff in consequences § Insurance particularly in rural areas companies Kampala § Require MFIs to reach § Limited products for rural Tolerance for some sustainability and graduate § MFIs with donor§ poor funding for failure (pushing new to commercial funds frontiers is risky) § Lack of insurance research and § Build technical capacity of products development § Appropriate SACCOs instruments including § Under-representation of § AMFIU § Train all SACCOS in the new commercial banks in substantial grants for standard § Commissioner collaborative efforts research and for co-ops accounting/reporting system development, developed by WOCCU § Limited use of data- capacity building; and stream/wireless equity for MFIs § Invest in research and technology in rural areas development for information systems, new products and § Unsound and unsafe SACCOs wireless technology Financial § Lackof vision for § AMFIU § Patient, long-term § Lead debate on building the infrastructure infrastructure needed for vision financial system (including § MFIs/AMFIU (meso) sector development with donor leasing) § Private sector § Inadequate MFI support for credibility and § Collaborate to fund research information systems for research and specialist staff in and development on MIS fast growth development Kampala § Build on initial CGAP/UICA § Few auditors specialized § Donors with § Grant instruments that auditor training in in microfinance MOP allow for five-year microfinance standards horizon for results § Minimal training facilities § Build market for local to build local capacity training services, stimulate private provision of these § No credit reference service (CRS) services (e.g., universities) § Once CRS established, train tier 4 institutions to report Policy § Inadequate regulation § Commissioner § Decision makers and § Lead dialogue on financial (macro) and supervision of for co-ops, specialist staff in system expansion SACCOS BOU, UCA, Kampala § Fund training of co-ops, UCSCU § No agreement on role of § Large donors with apex bodies, and BOU on financial services in § AMFIU long-term vision and SACCO regulation poverty alleviation political clout § MoFPED and § Uncertain role of MFF in MOP § Grant instruments to decision making fund small, focused technical assistance (e.g., workshops) Uganda Microfinance Effectiveness Review Page 29 SELECTED BIBLIOGRAPHY Association of Microfinance Institutions in Uganda (AMFIU). 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Uganda Microfinance Effectiveness Review Page 32 ANNEX 1: LIST OF PEOPLE INTERVIEWED/CONSULTED Name Title Organization Type Email Address Aguga Acon, Judith Local consultant Microfinance Outreach Plan Donor/ agugaacon@yahoo.co.uk Government Alinaitwe, Fred SOMED MFI somed@afasat.com Alinda K, Anne Ministry of Finance Government msepu@infocom.org Bagazonzya, Henry Coordinator Microfinance Outreach Plan Donor/ bagazonzya@yahoo.com Government Baguma, David T. Operations Feed The Children Uganda MFI Feedthechildred@ftcu.org Director Bantu, Fridah Fridahbantu2002@yahoo.com Beijuka, John Finance and JKB Consults Consultant Beijuka@infocom.co.ug management consultant Bekunda, George Coordinator, Ministry of Gender, Labour, Government georgepecr@africaonline.co.ug Youth Programs and Social Affairs Bongonzya, Program Manager UIB/MCC Training sbongonzya@uib.or.ug Stephen Institute Braun, Gabriela Program Advisor GTZ FSD Donor gbraun@bou.or.ug Broughton, Phil Chief of Party SPEED Project Donor pbroughton@speeduganda.org Brown, Jessica LSE/DESTIN j.r.brown1@ise.ac.uk Byanyima, Charles Microfinance Support Donor mscl@africaonline.co.ug Centre Ltd. Byarugaba, Executive Director SOMED MFI somed@afsat.com Benjamin Byarugaba, Richard Nile Bank Bank ramongin@nilebank.co.ug Car, Graham Managing ACLAIM Africa Consultant gcarr@aclaimafrica.com Consultant Dickson, UCSCU Network ucscu@africaonline.or.ug Turyahabwe Emunu, Ruth Executive Bank of Uganda Regulator remunu@bou.or.ug Director, Supervision Fernando, Microfinance Stromme Foundation Donor Grantham.Fernando@stroemme.co. Grantham Advisor ug Grant, William ECI Africa/FSDU Donor William.grant@eciafrica.com Griffiths, Frank Managing Director Barclays Bank Commercial Frank.griffiths@barclays.com Bank Hansen, Lene Consultant Former donor lenemph@infocom.co.ug, lenemph@hotmail.com Harpe, Stefan AFICAP Microfinance Fund Consultant Stefan@africapfund.com Heide, Morten NORAD Donor mhe@norad.no Irumba Babihirwe, CRS MFI pbabihirwe@crsuganda.or.ug Paul Joaris, Alain Chancellor, EU Delegation, Uganda Donor Alain.joaris@deluga.cec.eu.int Economics Uganda Microfinance Effectiveness Review Page 33 Name Title Organization Type Email Address Kabanda, Wilson General Manager UCSCU MFI ucscu@africaonline.co.ug Kabatalya, Olive Organization Development okabatalya@hotmail.com Consulting Kaganzi, Patrick Secretariat, Plan for Government pkaganzi@hotmail.com Modernization for Agriculture, Ministry of Agriculture and Fisheries Kajura, Victor Stanbic Bank kajurav@stanbic.com Kakuru, Alex GM/CEO FAULU Uganda MFI akakuru@faulu.com Kalyango, David L. Senior Principal Bank of Uganda Regulator dkalyango@bou.or.ug Banking Examiner, Micro Finance Kamuntu, Prof. Member of Sheema County South Government ekamuntu@parliament.go.ug Parliament Kamya, Agnes Director Bank of Uganda Regulator akamya@bou.or.ug Kashugyera, Lance Principal Ministry of Finance, Government msepu@infocom.co.ug Economist Planning and Economic Development Kasi, Fabian Managing Director FINCA Uganda MFI fkasi@finca.or.ug Kasisira, Grace Assistant Director Bank of Uganda Regulator gkasisira@bou.or.ug Katamba, Mathias PRIDE Uganda mkatamba@prideuganda.com Katantazi, Dorothy Executive Director MED ­ Net MFI Dorothy-katantazi@wvri.org Kiiza, Enid Bank of Uganda Regulator ekiiza@bou.or.ug Kiyaga, Edward MFI Edward_kyaga@wvi.org Koersgaard, Tyge DANIDA Donor tygkor@um.dk Kwamya, Wilson Assistant Resident UNDP Donor Wilson.kwamya@undp.org Representative Kyokunda, Grace African Development Bank Donor Grace.kyokunda@undp.org ­ Kampala Lankester, Sam Consultant slankester@aclaimafrica.com Ledgerwood, Deputy Chief of SPEED Project Donor jledgerwood@speeduganda.org Joanna Party Levine, Jeffrey Private Enterprise USAID Uganda Donor jlevine@usaid.gov Officer Lubega, Samuel FSA International Uganda MFI Malwade, Chris Consultant ftcchris@africaonline.co.ug Mambule, Jane Mbonye, Patrick MSE & MF Ministry of Finance Government msemfmanager@ccf.go.ug Manager Mio, Ryoko UNDP Donor ryoko.mio@undp.org Momo Masiko, NEDA MFI ameriamasiko@yahoo.com Ameria Uganda Microfinance Effectiveness Review Page 34 Name Title Organization Type Email Address Monsaingeon, French Embassy Timothee.mousaingeon@diplom Timothee atic.fe Msemakweli, General Secretary Uganda Cooperative MFI lmsemakweli@uca.co.ug Leonard Alliance Mudda, Amiri Manager Kiwafu SACCO Ltd. MFI kiwafu@yahoo.co.uk Mugwanya, Katimbo Executive Director Bank of Uganda Regulator kmugwanya@bou.or.ug Finance Muhakanizi, Keith Director, MFPED Government keith.muhakanizi@finance.go.ug Economic Affairs Mukasa, Eva Consultant evamukasa@yahoo.co.uk Musoke Lwanga, Board Chair PRIDE Uganda MFI hil@africaonline.co.ug Grace Musoke, Chris Deputy FSDU Donor chris@fsdu.or.ug Investment Manager Musoke, Paul K. General Manager PRIDE Uganda MFI pmusoke@prideuganda.com Mutabazi, Henry Manager SUFFICE Donor hmutabazi@suffice.or.ug Mutesasira, Leonard Director Concepts Unlimited Consultant leonard@koncepts- unlimited.com Muumba, Patrick Deputy Uganda Cooperative MFI pmuumba@uca.co.ug Coordinator, Alliance Ltd. CECFIF Project Mwesigye, Fred Commissioner Of Government mwesigye@hotmail.com Cooperatives Nakato, Robinah Bank of Uganda Government rnakato@bou.or.ug Nalyaali, Charles Chief Executive UMU MFI Ugandamu@infocom.co.ug Officer Namara, Suleiman Executive Director AMFIU Network amfiu@spacenet.co.ug Njuki, Samwiri Orient Bank Bank Samwiri.njuki@orient-bank.com Noble, Gerry Managing Director MICROCARE Other gerry@microcare.co.ug Obara, Andrew DFCU Ltd. Consultant jci@utlonline.co.ug Ocailap, Patrick Commissioner Ministry of Finance Government ocailapp@ald.finance.go.ug Ochaya, Robert SPEED Donor rochaya@speeduganda.org Odwongo, Willie PMA Government wodwongo@utlonline.co.ug Ogule, Wille DFCU Group Bank wogule@dfcugroup.com Okaulo, Peter CEO Uganda Women's Finance MFI uwft@swiftug.com Trust Okecho, Willibrord General Manager, CERUDEB MFI willibrord.okecho@centenaryba Microfinance nk.co.ug Opio Ogal, Moses Uganda Institute of opiogal@uib.org.ug Bankers Opio, Anthony Director, NBFI Bank of Uganda Regulator Aopio@bou.or.ug Rippey, Paul Manager DFID/FSDU Donor paul@fsdu.or.ug Ritchie, Anne World Bank Donor aritchie@worldbank.org Uganda Microfinance Effectiveness Review Page 35 Name Title Organization Type Email Address Schuster, Rodney Executive Director UMU MFI Ugandamu@infocom.co.ug Sekiziyu, John Finance Manager FOCCAS MFI foccas@africaonline.com Selin, Maria First Secretary, Sida Donor Maria.selin@sida.se Swedish Embassy Serukka, Priscilla Regional Director Stroemme Foundation Donor priscilla.serukka@stroemme.co. ug Singleton, Tony Chief Executive CMFL MFI tsingleton@cmf.co.ug Officer Somerwell, Francis Technical MICROCARE Other microcare@africaonline.co.ug Consultant Stark, Evelyn USAID, Washington, DC Donor estark@usaid.gov Steel, William Senior Advisor, World Bank Donor wsteel@worldbank.org Private Sector Thomasmore, Katutsi Kthomasmore2001@yahoo.com Thomson, Warwick DANIDA Donor psu@aspsuganda.org Tjossen, Paula SAS paula_sas@infocom.co.ug Tuhwezeine, AMFIU Network ctuhwezeine@yahoo.com Caroline Tumwine, Swithern Ugafode MFI ugafode@infocom.co.ug Vincze, Joakin RTS Uganda Other jvincze@rtsuganda.net Wakhweya, Development USAID Uganda Donor jwakhweya@usaid.gov Jacqueline Program Specialist Wako, Elane Feed the Children Uganda MFI Warlow, Robert Crane Bank Bank Robert.warlow@cranebanklimite d.com Wasukira- FOCCAS MFI focass@africaonline.co.ug Wanambwa P. Wavamunno, Clare President Association of Microfinance Network cwava@finca.or.ug Institutions in Uganda (AMFIU) Transformation FINCA MFI Manager Williams, Vivian Economic Director International Development COMESA idc@imul.com Craddock Consultants Uganda Microfinance Effectiveness Review Page 36 Annex 2: Ugandan MFI and Donor Survey Results Effectiveness of Microfinance Stakeholders in Uganda * (in percentages, with 100% the highest rating) Stakeholder Average for all Key elements of effectiveness MFIs Government Projects Donors stakeholders Strategic clarity 85% 77% 77% 82% 80% Staff capacity 65% 57% 75% 69% 67% Appropriate instruments 85% 69% 72% 71% 74% Relevant knowledge generation 85% 67% 77% 71% 75% Accountability 74% 62% 73% 77% 72% Cross-cutting collaboration 90% 81% 78% 76% 81% Average effectiveness rating 81% 69% 75% 75% 75% * As rated by Ugandan MFIs in 2003; compilation of responses from 13 individual Ugandan MFIs. Survey Results: Estimated Donor Support to Microfinance, 1999- 2003 * Total Type of Description Support (in US $ millions) support support (US $ millions) 2003 2002 2001 2000 1999 From the number above, the amount dedicated to the microfinance sector, both Total support through standalone projects or for Uganda components. The number 17.20 5.02 7.86 1.94 9.01 41.03 microfinance should be the amount disbursedand include support from any part of the donor agency (e.g., regional office or headquarters). Total amount of grants or non- Direct grants reimbursable investments that and were given to MFIs, either by 5.24 3.09 0.66 1.29 8.52 18.80 investments the donor or through a donor - in MFIs funded project (e.g. SPEED, SUFFICE, etc). Direct loans Total amount of loans made to and MFIs by the donor or donor- guarantees funded project. 7.25 - 3.87 - - 11.13 for loans to MFIs *Compilation of individual responses received in 2003 from the following donor agencies: DANIDA, DFID, World Bank, GTZ, Sida, NORAD, EU, UNDP, AfDB,and USAID The Consultative Group to Assist the Poor 1818 H Street, NW, MSN Q4-400, Washington, DC 20433 USA Tel: 202.475.9594 Fax: 202.52203744 Paris Office 66, Avenue d'Iena 75116 Paris Tel: 33 (0) 1 40 69 32 73 Fax: 33 (0) 1 40 69 32 76 cgap@worldbank.org www.cgap.org