DANIDA Peer Review: Letter to Management

Publication Date: 2003
Published by: Consultative Group to Assist the Poor (CGAP)
Document Type: Paper

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The letter outlines DANIDA's strengths, weaknesses and recommendations to improve microfinance operations.

This document comprises a letter to the management of the Danish International Development Agency (DANIDA) by a CGAP Peer Review Team. The review was part of an initiative to tackle aid effectiveness by using microfinance as a test case.

The Peer Review team:

• Focused on the internal procedures, practices and processes of DANIDA;
• Identified the success factors and constraints that influence the effectiveness of its microfinance operations.

The letter outlines DANIDA’s strengths and weaknesses and presents the following recommendations to the DANIDA management:

• Decide on the future level of involvement in microfinance - The management should decide whether it wishes to expand, maintain or reduce its microfinance portfolio.
• Build a common vision on the role of microfinance – DANIDA needs to articulate a clear vision of the role of microfinance, embed its microfinance operations in private sector development, and ensure that the staff internalizes the new vision.
• Implement microfinance good practices – DANIDA needs to develop simple tools and integrate these into the aid management guidelines and other key documents.
• Develop a performance measurement framework – DANIDA should include a set of microfinance indicators in the design, monitoring and evaluation of its microfinance operations; analyze performance; compare it with international benchmarks; and adapt funding accordingly.
• Improve technical capacity and knowledge management - DANIDA should create a full-time microfinance focal point and train the staff in microfinance good practices.
• Work through strategic partnerships - The management should identify global, regional, and country microfinance leaders and establish strategic partnership agreements with them.

[Based on author's abstract]