Strategic Review of Existing UNDP-Social Fund Microfinance Operations (SUM Technical Review Mission: Republic of Djibouti)

This paper discusses the poverty alleviation programs of the United Nations Development Program (UNDP) and the Social Fund for Development (SFD) in Djibouti. The program involved extending support to income generating activities, through small scale, short-term loans.

The paper details one particular program of the SFD, called Micro-Credit, and recommends that the SFD should:

• Put together a coherent, long-term microfinance strategy;
• Communicate this strategy to partner NGOs;
• Lead the way in the development of best practices;
• Clarify its own vision and mission for microfinance in Djibouti.

The paper makes the following recommendations about the relationship between UNDP and SFD:

• Technical assistance (TA) should be supplied to establish a national microfinance strategy. This TA should be provided by a company well-versed in various loan methodologies and institutional models;
• The consultant should not impose a fixed model on the people.

Finally, the paper recommends the following steps for a long-term partnership between the SFD and the NGOs:

• A simpler method for cash-advancement;
• An outline of institutional objectives to be reached by NGOs;
• Increased training in microfinance for NGO members;
• Regular presence of SFD staff in the field;
• Review of accounting methods by an auditor;
• Provision of adequate information;
• Presentation of weekly and monthly reports to SFD by NGOs;
• Regular meetings.