Microfinance in Social Funds and CDD Projects: Building Financial Systems that Work for the Poor

This presentation explores how social funds (SF) and CDD projects can build sustainable institutions that serve the poor.

SF/CDD projects can build sustainable institutions to serve the poor by either reaching down to provide services to low-income communities or linking up from the community level to banks. The presentation considers benefits and challenges of both these approaches.

SF/CDDs should choose to reach down and offer services to low-income communities if competent banks, MFIs or cooperative networks exist or can be attracted to the project area. Such projects should select partner organizations using performance criteria, link funding to performance and provide capacity building support to participating financial institutions. SFs/CDDs can choose the approach of community organizations linking up if competent banks, MFIs or cooperative networks do not exist or cannot be attracted to the project area. In such cases, they should:

• Use a savings-first approach;
• Protect savings from fraud and mismanagement;
• Provide capacity building assistance to the community organization to build strong products and systems;
• Develop business relationships with banks;
• Support community organizations efforts to build federations.