Possible scenarios for supporting microfinance include the following:

  • Expand. The donor makes microfinance a strategic priority and invests significantly in developing an agency-wide vision and strategy, technical staff capacity, systems for accountability, and knowledge management.

 

  • Delegate. The donor decides that it has a limited comparative advantage, but wishes to remain involved in microfinance. It forges co-funding or other types of agreements where the design, implementation, monitoring, and evaluation of microfinance projects are delegated to an agency with a clear comparative advantage in helping to build inclusive financial systems.

 

  • Phase out. Based on its limited or nonexistent comparative advantage, the donor decides to stop developing new microfinance operations and winds down its existing portfolio. Resources previously used for microfinance are reassigned to other development sectors where the agency can be more effective.

 

  • Consolidate. The donor decides to retain the same volume of microfinance spending and specialize in particular niche markets (geographical or technical) where it has a comparative advantage. The concentration of its portfolio yields greater impact for the same amount of funding.