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Promoting Inclusive Markets and Financial Systems

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NCAT is in the air in Africa

by on Jul 8, 2013  |  posted in Association Services, Responsible Finance  |  1 Comment
SEEP’s Responsible Finance through Local Leadership (RFLL) in Sub-Saharan Africa Program, supported by The MasterCard Foundation, promotes the responsible development of the microfinance markets through strong local leadership. It does this by 1) building the organizational capacity of microfinance associations (MFAs) to consistently deliver high quality, demand-driven services to local markets, 2) creating more transparent business environments to support responsible finance, 3) promoting the widespread application of consumer protection principles and practices, and 4) developing a strong learning platform to scale and sustain industry development in Sub-Saharan Africa. The program provides direct support to eight associations in Sub-Saharan Africa (SSA), while extending learning to other SEEP association members in Africa and globally. These MFAs - APSFD-Senegal, APSFD-Burkina Faso, APSFD-Cote d’Ivoire, Consortium Alafia-Benin, AMIR-Rwanda, AMFIU-Uganda, AMOMIF-Mozambique, GHAMFIN-Ghana,- have together a membership of nearly 500 microfinance institutions, serving in total 6 million clients. Underway for about a year and a half, the partnership with the selected associations began with a NCAT assessment. The Network Capacity Assessment Tool (NCAT) is the only globally recognized assessment methodology for evaluating the organizational capacity of microfinance networks and has been utilized in over 50 evaluations of microfinance networks in virtually every region in the world.  The NCAT includes 65 indicators to assess effectiveness of MFAs in six overarching capacity areas: governance, operations, financial viability, human resources, external relations, and service delivery. Based on a review of MFA documents and on-site interviews and analysis, each capacity area is scored using 10-13 measurable indicators on a scale of zero to 4 against a set of Standards of Excellence reflecting the optimal state of operations considered essential for association success. For the first time during these assessments, the NCATs were expanded to include sector level inquiry on the transparency and consumer protection practices in each country, piloting a series of specific standards of excellence and indicators to help establish baseline data for the Program and provide recommendations as input to the MFA Institutional Strengthening Plans (ISPs). The transparency indicators focused on the extent to which MFAs are currently incorporating financial and social reporting standards into their data collection and how data reporting and utilization is verified and promoted, e.g. through feedback to individual member MFIs and through aggregation and publication. The consumer protection principles (CPPs) indicators sought to determine the capacity of MFAs to promote a consumer protection focused agenda in their respective markets by assessing the extent to which systems are in place to support and promote the application of good practices (training, awareness raising, complaints handling, etc.) and the roles played by MFAs to strengthen member compliance through disclosure of product pricing and safeguard against client over indebtedness. NCAT Results We found 3 stages of development among our selected partner associations:
  • 1 “emerging” association, scoring 1.5 out of 4
  • 6 “expanding” associations scoring between 2.0 to 2.8
  • 1 “mature” association, scoring 3.1
The following issues were common to most MFAs assessed:
  • Strategic and business plans: Some plans had expired (or were in the process of expiring) and needed to be updated, while others were not well made;
  • Human resources: weaknesses were noted in terms of HR management tools, internal organization and staff capacity;
  • Sustainability and cost accounting: no efforts were made to measure the profitability of each service and product in the MFAs and most MFAs were very far from covering their core costs; and
  • Services to members: MFAs did not have tools to obtain members’ feedback on the set of services and products proposed and did not have a close relationship with their members.
Additional Observations on the Program Partners MFAs had not yet developed strong systems for tracking and measuring progress in CPP related issues and this should be an area of focus during the program implementation. Consumer protection had more traction in more markets than in others across the participating MFAs, but interest was relatively high and several MFAs were actively promoting evolving standards and practices among their members through the adoption of codes of conduct or practice, training in self-assessments and SPM, and the development of client grievance systems and credit reference services. It is an emerging field of work for most MFAs, and the lack of clarity on roles vis-à-vis regulators reflected in reporting also affected performance on compliance issues. Transparency is recognized as a priority for most MFAs, and in a majority of markets, members and external stakeholders acknowledge their role in ensuring accurate and timely data collection, consolidation and reporting. In several countries, MFAs have or are in the process of defining the data to be collected and providing members with training, facilitation of ratings, and, to a more limited extent, participating in performance benchmarking.  There is will, but resources are limited. All in all, NCAT implementation in the eight different associations showed openness to answering questions and discussing issues on the country‘s microfinance sector and on the MFA strengths and weaknesses, and buy-in of the process from the different stakeholders Moreover, the exercise led to strong recommendations that seek to help MFAs carry out changes that can in relatively short term, bring a big difference in the way the MFA and its programs are run. One of the MFA executive directors told the team that conducted the NCAT at his MFA: “this [the NCAT report] has become my reference book now.” This is the first in a series of monthly blogs highlighting the RFLL program. See you next month!

1 Comment

henry says:
Jul 07, 2013

I agree with your thought.Thank you for your current sharing.

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