How the Netherlands Government Fostered Successful Public-Private Partnerships for Financing MFIs

This case study examines how a change in Dutch microfinance funding policy led to successful public-private partnerships that brought private financial expertise to microfinance funding and increased the amount, range and flexibility of financial instruments offered to MFIs.

The paper discusses:

• The development of partnerships between the Dutch Government and several private socially oriented Dutch financial institutions;
• The Dutch Government's new policy for financial support to microfinance;
• The structure of these public-private partnerships, which allows the Government agencies and the private financial institutions to concentrate on their area of expertise;
• Three such partnerships in detail.

The paper lists the following methods to improve the effectiveness of the public-private partnerships:

• Syndicated lending;
• Focus on niches;
• Increased coordination at all levels.

The paper also discusses public-private partnership lessons for donors:

• Donors who do not have a wide range of financial instruments or technical expertise should fund institutions that do;
• Governments should not intervene directly; rather, they should allow private institutions to implement financial projects;
• Grants should be separated from loans and equity investments.

The paper concludes that by facilitating the development of public-private partnerships, the Dutch Government has made microfinance financing more effective and has succeeded in building sustainable MFIs that alleviate poverty.