Posted on February 2, 2010 - by James

State Of Global Microfinance

TESTIMONY January 27, 2010 DAMIAN VON STAUFFENBERG; CHAIRMAN AND FOUNDER MICRORATE HOUSE FINANCIAL SERVICES

Mr Chairman, Members of the Subcommittee,

MicroRate is the first rating agency dedicated to measuring the performance of microfinance institutions (”MFIs”). MicroRate’s rating teams visit MFIs and “kick their tires”. We have been doing this since 1996 and we have by now rated many hundreds of MFIs. When you see so many of these institutions, certain patterns begin to emerge. I will describe some of these patterns, which are relevant to the question you are considering: what are the appropriate roles of public and private funding of microfinance? Before I started MicroRate, I worked for 25 years in the World Bank and (mostly) in its private sector affiliate, the International Finance Corporation.

Let me just mention that MicroRate is financially independent. We receive no donor money. I therefore feel free – with your permission – to speak openly not just about what works in microfinance, but also – and especially – about what doesn’t work. Yes, microfinance is a development success story. It really is! That is remarkable in itself, and it is all the more remarkable, because development is not noted for its successes. But let me immediately inject an element of caution. Your invitation for this hearing refers to microfinance as “one of the great success stories of US foreign aid”. That, Mr. Chairman, is overstating things. Microfinance is a success, but whether US aid for microfinance has been equally successful is not so obvious. Our experience tells us that there are some notable successes, but there are also a great many failures. I would trace many of those failures back to two factors…

Read more…