Workshop Capacity building for social inclusion Annual EMN

Workshop: Capacity building for social inclusion Annual EMN Conference “ 2010: A Changing Europe combating poverty, supporting enterprise” London, 24 th of June Michael Unterberg 9 June 2006 1

Capacity Building in European Microfinance Building what? What is it good for? What kind of organisations are meant? How is it connected to social inclusion? Let’s build the case for capacity building in European Microfinance in Western Europe - a synopsis - 9 June 2006 2

MF in Europe: A sector under construction Example Germany Example Romania Strong policy interest in recent years A new national guarantee fond was set up in 2010 Aim: Building up a nation wide supply of micro-loan providers Legal framework for microfinance changed markedly in the last 5 years Dedicated microfinance organisations becoming banks New providers with commercial orientation It‘s about building. . . Frameworks Markets Organisations Microfinance in Western Europe - a synopsis - 9 June 2006 3

Organisations in Microfinance Banks (Semi-)public bodies They don't cover the microcredit market as a main business proposition They are doing microcredit as part of their mission e. g. employment offices They favor efficiency for more profitability They have only weak incentives for efficiency in place They have organisational structures built for providing many different financial services They have organisational structures built for administration tasks MFI They are dedicated to microcredit provision They favor efficiency as a pre-condition for outreach and growth Their organizational structures are flexible Microfinance in Western Europe - a synopsis - 9 June 2006 4

What are the organisational challenges for European MFI? European MFI are. . In Western Europe: European MFI have to deal with. . . Small and realtively young target groups that are hard to reach Non-banking organisations niche markets Socially oriented limits of efficiency in inclusion lending In Central/Eastern Europe: More matured organisations Some „semi-banking“ organisations More commercially oriented constant changes in funding conditions unfavorable and/or changing legal frameworks Are European MFI capable of meeting these challenges? Microfinance in Western Europe - a synopsis - 9 June 2006 5

Capacity building in MF: What is it, and what not? Capacity building is. . . Capacity building is not. . . …a broad concept for organisational and institutional development, closely connected to technical assistance (TA) …a concept with strict definitions and goals …a tool for social inclusion as it allows to reach excluded target groups more efficiently …a task that European MFI can fulfill on their own …a concept confined to improving the profitability of MFI …a long-term, continuing process, in which all stakeholders have to participate Institutional capacity in MFI can be broken down in different dimensions: Capacity of structures (e. g. policies, processes, infrastructure) Capacity of people (e. g. staff, human resources, expertise) Capacity to plan (e. g. vision for MF, strategies, funding models) Capacity to perform (e. g. outreach, growth, impact) Microfinance in Western Europe - a synopsis - 9 June 2006 6

Status Quo: MFI Capacity levels in Europe Pilot Study in eight European countries 5 dimensions of capacity self-assessment questionnaire interviews and focus groups visualization in spider diagrams Results for Western Europe low overall capacity levels underdeveloped systems for performance measurement and analysis average capacities in human ressources lack of sustainable funding models Microfinance in Western Europe - a synopsis - Results for Central and Eastern Europe need to further develop already existent performance and impact measurement systems. Need to adapt these systems to changing regulations and monitoring requirements. flexible MIS to cope with the demanding monitoring requirements of regulation 9 June 2006 7

How to make Capacity building work in Europe Important Questions from a MFI perspective on capacity building: Who are the stakeholders? How to work with an advisor? What is the role of the networks? Which standards & specialised solutions are available? Is there any public support for my organisation? What lessons are to learn from successful MFI? What are the needs in my organisation? Microfinance in Western Europe - a synopsis - 9 June 2006 8

Aim of the Workshop: Bring different perspectives together to „make it happen“ Donor‘s perspective Speaker: Cyril Gouiffés, EIF, Luxembourg EIF‘s Vision on MF in Europe Role of TA in fostering the European MF sector The JASMINE programm for TA Advisor‘s perspective Speaker: Aldo Moauro, Microfinanza Rating, Italy Practitioner‘s perspective Speaker: Georgi Breskovski, Mikrofond, Bulgaria • Past experiences of Mikrofond with capacity building • Recent capacity building needs of Mikofund • Experiences in working with external advisors Participation in JASMINE programme Network‘s perspective Speaker: Piotr Korynski. , MFC, Poland • Status Quo of capacity for MF in Europe Role of networks in capacity building • What have advisors/TA-provider to offer? How to monitor capacity levels of the members? • Tools and strategies for capacity building in inclusion lending Microfinance in Western Europe - a synopsis - Role of MFC in the JASMINE programme 9 June 2006 9