Knowing When to Stop: The Case of UNDP Bangladesh

Between 1996 and 2001, UNDP launched fourteen projects involving microfinance (MF) components in Bangladesh. Although their specific objectives were varied, the projects shared the overriding goal of empowerment and, consequently, poverty reduction. This paper presents the experience and learning from these projects.

Some of the problems associated with these projects were:

• MF components were seen as auxiliary and their sustainability was not considered;
• No MF specialists were involved in the design, implementation or monitoring of the projects;
• Cheap credit drew in crowds.

The consequences associated with the projects:

• Low repayment rates;
• Contamination of neighbouring MFI portfolios;
• Neglect of skills training due to focus on MF;
• Further impoverishment due to inefficient MF programs.

Based on the UNDP experience, the author mentions steps to exit ineffective MF projects. Some of the steps mentioned are:

• Have a clear MF policy;
• Include MF expertise in the country team;
• Be prepared to ask if projects can be better;
• Hire MF experts to undertake reviews;
• Ask for honest assessment of projects;
• Involve staff in close-down strategy;
• Be transparent about decision.

The author recommends that the donors ask some of the following questions to prevent going in the wrong direction:

• Is credit really necessary?
• Are the credit components viable?
• How clear are the MF policies?
• What does the organization have to offer?
• Does the organization have an in-house technical expert?