CGA P TH E C ON S U LTAT I V E G ROU P T O A S S I S T T H E P O O R E ST [ A M I C RO F I NAN C E P ROG RAM ]
APEX INSTITUTIONS IN MICROFINANCE
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Summary
This paper reviews the experience of national microfinance apexes—wholesale mecha-
nisms that channel funds, with or without supporting technical services, to retail mi-
crofinance institutions (mfis) in a single country or integrated market. The question of
the effectiveness of these apex mechanisms cannot be answered categorically, because
evidence is limited, national contexts vary widely, and there are legitimate differences of
view as to apexes’ objectives. However, some useful generalizations and lessons can be
drawn. Most of these lessons would also be relevant for guarantee facilities that support
commercial bank lending to mfis in a country, even though such facilities were not stud-
ied in the research leading to this report.
∫ Apexes probably expand the supply of resources available for unlicensed microfinance
institutions, at least in the short term.
∫ However, microfinance development in most countries is held back more by a short-
age of strong microfinance institutions at the retail level than by a shortage of whole-
sale funding.
∫ Planning documents for apexes typically overestimate the number of retail mfis that
will be strong enough to channel the apex’s funds effectively.
∫ Apexes for unlicensed microfinance institutions (such as ngos) are most likely to be
useful when they are created in response to the existence of a critical mass of competent
retail mfis, as was the case with pksf in Bangladesh.
∫ Apexes that fund licensed institutions such as banks and finance companies have sel-
dom been successful in encouraging these institutions to continue microlending when
the apex money runs out. The only exceptions to this pattern seem to be where the apex’s
funds were linked to day-to-day technical assistance from a group that (a) had a track
record of running sustainable microfinance itself, and (b) was able to provide the retail
OccasionalPaper
NO. 6 JANUARY 2002
Editor’s Note: This study is longer and denser than CGAP’s usual Occasional Paper. It was writ-
ten mainly for people involved in planning, managing, or evaluating microfinance apex orga-
nizations. The less specialized reader may be content to read only the summary at the beginning
of this paper and the section on conclusions at its end (pages 24 to 29).

2institution with a fairly complete “turnkey” package
of information and management systems. The num-
ber of such technical assistance providers is very small
at present.
∫ Apexes have not been successful in building bridges
between mfis and commercial funding sources. In-
deed, the incentive to seek commercial funds is weak-
ened by the availability of easier funding from the apex.
∫ It may not be reasonable to require that apexes be
financially sustainable themselves (after imputing a
charge for the opportunity cost of their capital).
∫ Little evidence was found that apexes play a useful
role in coordinating among donors and harmonizing
their requirements.
∫ Management is key to an apex’s effectiveness. The
actual availability of managers with the necessary
technical and personal qualifications should not be as-
sumed, but rather should be investigated carefully at
the planning stage.
∫ The most important function of apex management
is probably the selection of mfis to be funded. Be-
cause the number of qualified mfis is usually limited,
managers have trouble applying proper selection cri-
teria when they are faced with political pressure or
pressure to disburse large amounts quickly.
∫ In the apex’s supervision of the mfis it funds, fo-
cusing on institutional performance targets that are
few in number, precisely defined, and seriously en-
forced is probably more effective than requiring mas-
sive reporting on detailed uses of funds.
∫ Political interference is a common problem in
apexes, despite assurances to the contrary at the plan-
ning stage. The best protection will usually be to keep
state participation in the governance of the apex to
the minimum level possible.
∫ Donors and governments tend to create unrealistic
disbursement pressure for apexes. It would usually be
preferable for initial funding of an apex to be mod-
est, with larger amounts added later in response to
demonstrated demand and capacity.
I. Introduction
Despite a growing list of successful experiences, the
absolute number of viable microfinance institutions
remains small and, in most countries, insignificant
relative to the number of potential clients1. One
means by which governments, international financial
institutions and donors2, and in a few cases private
organizations are trying to expand microfinance ser-
vices is the establishment of wholesale financial mech-
anisms to channel financial resources to retail mfis.
These wholesale mechanisms are known variously as
apexes, second-tier banks, national funds, etc. For
purposes of the present paper, the term apex will re-
fer to an institutional mechanism operating within a
single country or integrated market to channel funds,
with or without technical assistance or other sup-
porting services, to a significant number of retail
mfis.3
International donors and ngos are in a certain
sense “wholesalers” of support to mfis, but they are
not included among the apexes examined here. Sav-
ings and loan cooperatives often form federations
that provide services to the retail cooperatives, but
these mechanisms will not be a central focus of this
1 Of the mfis tracked by The MicroBanking Bulletin, 60 are currently
classified as financially sustainable or near-sustainable. (The MicroBank-
ing Bulletin, Issue No. 4, February 2000).
2 “Donors” as used in this paper refers to bodies other than the host-
country government that provide subsidized resources to support mi-
crofinance, including official bilateral donors, multilateral lending insti-
tutions, and occasionally foundations and other private organizations.
3 No effort is made to define “significant number.” The term serves only
to emphasize the obvious proposition that the multiplier effects and
economies of scale that justify the creation of a wholesaler depend on the
number of viable and potentially viable retailers that comprise its market.

3paper because financial cooperatives typically draw
most or all of their funding from their individual
members, not from their federations. In some coun-
tries there are guarantee facilities that help mfis get
loans from commercial banks by guaranteeing part or
all of those loans. Only one guarantee facility was in-
cluded in this research, but most of the lessons re-
ported here probably would apply to single-country
guarantee facilities as well because these facilities face
most of the same challenges that national wholesale
funds face.
This paper reviews the experience of national apex
institutions in furthering the development of mi-
crofinance. Its intended audience is mainly govern-
ments and donors considering establishment of
apexes, and managers charged with running them.
The paper is based primarily on available descriptions
of apex institutions, many of which were written in
the context of preparing, supervising, or evaluating
lending operations of the international financial in-
stitutions (ifis). In only a few cases was the intention
of these documents to evaluate the role and perfor-
mance of the apex institution itself.4 These materials
are, in some cases, several years old, and many of the
apex institutions themselves were then young with
short track records.5 Moreover, the wide variety of in-
stitutional approaches that have been taken, the even
greater differences in national contexts, and legiti-
mately differing views about apex institutions’ objec-
tives all make broad judgments about their perfor-
mance difficult. Nevertheless, some generalizations
are possible, and some lessons of experience can be
suggested.
A distinction is frequently made in the paper be-
tween mfis that are licensed and subject to pruden-
tial regulation and supervision by government finan-
cial authorities, and those that are unlicensed—often
non-governmental organizations (ngos). Licensing
usually brings with it, inter alia, the authorization to
accept savings deposits, to mobilize resources from
domestic capital and financial markets, and to receive
liquidity support from the central bank. The apexes
reviewed for this paper vary widely in the proportions
of the licensed and unlicensed retailers they serve.
The distinction is important. Licensed financial insti-
tutions presumably have banking skills and good ac-
cess to funding, so the apex’s task would be to con-
vince and assist them to move “downstream” from
their traditional clientele to serve the needs of mi-
croenterprises and poor families. By contrast, unli-
censed mfis have less access to commercial funding
and are more likely to need help building financially
sustainable businesses.
Apexes are created to support retail mfis. But what
precisely are apexes supposed to help mfis do? Be-
cause any evaluation of apexes necessarily depends on
an answer to this question, it is important to state
transparently the assumption behind the judgments
in this paper. The belief of the present author is that
in almost all countries, donor and government fund-
ing will not be large or permanent enough to assure
the continuing delivery of microfinance services to
the millions of the poor and near-poor who need
them. If this is true, then microfinance can achieve
massive outreach over the long term only if it is able
to tap commercial sources of funding, including the
deposits of the public. To do this, mfis must be finan-
cially self-sustainable—that is, able to cover all their
costs including the cost of the commercial funding
they will need to finance massive expansion. Thus,
this paper asks not only whether apexes can provide
money for retail on-lending to poor borrowers, but
4 One of the few efforts in this regard was a set of studies contracted by
cgap and carried out by a team of Ohio State University researchers un-
der the direction of Prof. Claudio González-Vega. The present study is
an extension of that effort, expanding the coverage of documented ex-
periences.
5 A list of the institutions covered is given in Annex 1. The amount and qual-
ity of information available varied widely from one to another, explaining
in large part the relative frequencies of references to them in the paper.

4also whether they are likely to play a significant role
in the emergence of a sustainable microfinance sys-
tem in a country.
In reviewing the debates about apex institutions,
several propositions are taken for granted:
∫ All of the participants in the debate share as a mu-
tual objective the rapid development of microfinance
as a tool for expanding economic opportunities for
lower-income peoples;
∫ Country situations are sufficiently different that
there are no one-size-fits-all answers about how best
to achieve that development; and
∫ Even though sharing the same overriding objective,
different stakeholders—e.g., governments, donors,
apex managers, mfis, final borrowers—will naturally
have different perspectives and time horizons for
evaluating the costs and benefits of alternative ap-
proaches.
Consequently, this paper does not set out to iden-
tify an ideal model for apex institutions. Indeed, this
kind of exploration can do little more than to under-
line some of the practical questions and warning
lights that policy-makers, institution-builders, and
those that would seek to assist them will need to take
into account in moving forward.
The remainder of the paper reviews the experience
of microfinance apex institutions around the world and
draws some useful lessons for governments, donors,
and others considering to establish, enhance, or use
them as vehicles for supporting the development of
microfinance. Section II summarizes the benefits pro-
ponents expect from apex institutions and the criti-
cisms expressed by skeptics. Section III looks at
apexes’ documented performance in delivering these
expected benefits. Section IV looks briefly at sectoral
issues, including macroeconomic stability and inter-
est rates. Lessons suggested by the available experi-
ence are summarized in Section V.
II. Assumed Roles and Objectives of
Apex Institutions
There is a surprising degree of polarization in the dis-
cussion of apexes and a relative scarcity of empirical
analysis of the actual experience. Box 1 provides a
thumbnail sketch of the positions taken on both sides
with regard to the principal functions most often as-
signed, actually or theoretically, to apexes. The state-
ments are direct quotes or close paraphrasings taken
from formal papers and informal email exchanges
among practitioners. The following overview will set
the stage for the review in Section III of apexes’ ac-
tual performance of the various functions that have
been proposed.
Wholesale Financial Intermediation
Apex institutions receive large volumes of funding,
repackage it into smaller amounts, and pass it as
loans, grants, or technical assistance to retail mfis.
Most mfis, like their poor clientele, are not taken se-
riously or are seen as uneconomic by domestic and in-
ternational financial markets. They often are unli-
censed and not permitted to mobilize savings, are
unaware of or unable to implement rapidly develop-
ing microfinance technologies, and are thus limited
in outreach potential and ability to achieve the
economies of scale and other requisites of eventual
self-sustainability. At the same time, some interna-
tional donors and financial institutions find it difficult
or impossible to reach retail mfis directly—especially
small ones—and to provide the tailored, hands-on
assistance and supervision that may be required. Apex
institutions are thus created to serve as the interme-
diaries between the few large sources of financing and
the potentially large number of small users.
For a wholesaling institution to realize the assumed
economies of scale that justify its creation, however,
there must be a sufficient client base of viable retail-
ers to serve the ultimate consumer of the goods or
services. The critics of apexes do not question the

5Box 1: The Two Sides of the Apex Issue
What the Advocates Say
Apexes provide a window through
which governments, donors and
international lenders can move larger
amounts of money into microfinance
than they would be able
administratively to lend directly to MFIs.
In some countries, access to
commercial funding markets is not a
realistic option for MFIs.
Apexes can achieve important
multiplier effects by rapidly expanding
the number of MFIs as well as the
client-serving capacities of each.
Because they are closer to and more
familiar with the market, apexes are in
a better position than external
lenders/donors to identify the most
capable MFIs, and they can do so at
lower cost.
By centralizing donor activities, apexes
can shield MFIs from donor pressures
and bring consistency to the otherwise
confusing diversity of donor
approaches, standards, reporting
requirements, etc.
As a specialized center of expertise,
and with the carrot provided by its
funding capacity, apexes are well
placed to disseminate the philosophies,
methodologies, business strategies,
MIS systems, management and
governance guidance, etc. needed to
develop sustainable MFIs and to
monitor performance.
What the Skeptics Say
Money is not currently the binding constraint on the
expansion of microfinancial services; the bottleneck
is the lack of adequate retailing capacity.
Building mechanisms to encourage lending to MFIs
is simply the wrong focus; the core issue is the
financial sustainability of the MFIs themselves.
Easy and cheap access to apex funds undercuts
MFIs’ incentives to mobilize resources themselves
from the market.
Apexes are premised on wishful thinking about the
power of the offer of money to upgrade behavior,
and about the number of institutions that can be
significantly upgraded.
Effective coverage of a country’s microfinance
market does not require a large number of MFIs.
There is a significant trade-off between the number
of MFIs supported and the intensive institution-
building support required by each.
Apexes themselves often lack the technical capacity
to appraise and monitor MFIs and are seldom able
to escape the political pressures inherent in MFI
selection. Moreover, they are susceptible to intense
pressure from both government and donors to move
the money.
Each donor’s flexibility is tightly constrained by its
own legal and political mandate and philosophy.
Apexes thus end up working only with a single donor
or having, at very high cost, to keep separate books
and administer separate standards, credit lines,
methodologies, and reporting requirements. The
apex simply passes these costs down to the MFIs,
adding its own cost layer in the process.
To the extent that standardization of approach is
achieved, the apex succeeds in dampening the
initiative and innovativeness of the MFIs.
Apexes allow donors to avoid the “hard slogging” of
capacity building at the retail level. However, the
development of viable microfinance capacity is a
slow and costly process at both the apex and retail
level. Apexes, at startup, lack the same capacities
themselves, and often lack the information systems
necessary for adequate monitoring and enforcement
of standards. The time and costs of creating an
effective apex would be better spent developing the
necessary retail capacity.
The effective distance of most apexes from their
clients, as well as from international experience,
negates their alleged informational advantages.
The Function
Expand MFIs’ access to a greater
volume of financial resources on
better terms
Build a microfinance industry by
bringing financial and technical
assistance resources to a larger
number of MFIs
Selection of viable and potentially
viable MFIs
Improve donor coordination
Institution building of client MFIs

6large number of potential end-users of financial ser-
vices. They question rather the effective retailing ca-
pacity of existing mfis and the latters’ ability to
achieve sustainability. Adequate retailing capacity, not
money, is argued to be the effective constraint on ex-
panding outreach. Indeed, the soft terms on which
apexes in many countries relend to the mfis may in-
hibit the sustainable expansion of outreach by un-
dercutting the latters’ incentives to become financially
self-sufficient.
Building the Retail Microfinance Market
In a very few cases (pksf in Bangladesh is the most
often cited), the pre-existence of a sufficient number
of viable or potentially viable mfis may have justified
the emergence of a wholesaling institution to provide
economies of scale or otherwise facilitate their access
to national and international funding, information,
and technology. In the vast majority of countries,
however, fewer than a handful, if any, viable mfis can
be identified. In several cases (e.g., K-Rep in Kenya
and FondoMicro in the Dominican Republic), insti-
tutions starting out as apexes have been unable to
identify and attract a sufficient nucleus of actually or
potentially viable mfis to support the wholesaling
function, and have become microfinance retailers
themselves. Where a critical mass of viable retailing
mfis does not exist, can apex institutions be success-
ful in creating them? And if so, how long will it take
and at what opportunity cost? These are the questions
that divide the advocates and skeptics of apexes as de-
velopers of their own market—i.e., the mfis—and
their ability therefore to make microfinancial services
available to a much larger proportion of the target
population.
The ability of the apex to help retail mfis become
more competent depends either on its own already-
acquired expertise in retail microfinance or on its
Box 1: The Two Sides of the Apex Issue (con’t.)
The Function
Establish bridge between MFIs and
financial/capital markets
Providing monitoring and supervision
of MFIs
Reduce costs of technical assistance,
training, and back-office activities
What the Advocates Say
By virtue of its own size, status, and
access to external funds, apexes can
provide information and create
instruments (e.g., partial guarantees),
to enable MFIs gradually to access
national and international financial
and capital markets.
As specialized institutions, apexes are
in a better position than already
overstretched central banks and bank
regulators to provide oversight
consistent with the special demands
of sound microfinance.
Given their large scale, apexes can
provide (or contract) technical
assistance and other support activities
at lower cost than can the individual
MFIs, passing these savings on to
their clients.
What the Skeptics Say
The large and often below-market funding and weak
discipline provided by apexes protect MFIs from
market discipline and dampen their incentive to seek
market funds.
The apex’s links to the market and its guarantees are
of little value if the apex itself has not achieved
credible financial viability.
As a general rule, apexes have not in fact gained or
facilitated access to commercial funding markets.
Even if apexes had the skills and information
systems required for prudential supervision, such a
function would run into serious conflicts of interest
with its lending and technical assistance activities.
The expected economies of scale are illusory in the
absence of a sufficient number of capable MFIs.
Large amounts of time and money are consumed in
the establishment and maintenance of the apex.

7superior position, compared to the individual mfis
themselves, to draw upon that expertise wherever it
may exist and make it available to the mfis. It depends
also on the quality of the relationship between the
apex and the mfis and the ability of the apex to mo-
tivate, assist, and monitor the progress of its clients
toward sustainability. Advocates argue that a local
apex institution is in a much stronger position than
either government or international donors and
lenders to select the best potential candidates for vi-
ability and to provide the necessary hands-on guid-
ance and supervision. Skeptics, on the other hand, ar-
gue that national apexes seldom have either the
expertise or the institutional independence needed for
this function. Even where these qualities exist, they
argue, the labor intensity of developmental work with
mfis severely limits the number of mfis that an apex
can strengthen. If the staff of the apex itself are new
to microfinance, additional time and cost are needed
to develop their own capacity to assist mfis, time and
resources that some critics argue would be better
spent from the outset on developing a few individual
mfis directly. These critics note that serving a large
microfinance market does not necessarily require a
large number of mfis: in most of the countries where
the microfinance market is relatively well developed,
the vast majority of the clients are served by a small
subset of the countries’ mfis. Despite the small num-
ber of mfis that dominate these markets, there is
strong competition rather than oligopolistic collusion.
Bridging the Gap between MFIs and the
Financial Markets
Apex institutions serve principally as financial inter-
mediaries, receiving loan and grant resources for re-
allocation to microfinance retailers. However, as the
mfis move toward financial sustainability, apexes
might be able to create direct bridges between mfis
and licensed financial market institutions, including
commercial banks and finance companies, other sav-
ings institutions, and the bond and stock markets.
They could do this in a variety of ways. In the first in-
stance, mfi repayments of their own obligations to
the apex institution might demonstrate to the market
their creditworthiness and the potential profitability
of lending to or investing in them. The apex could
also provide the market with information and ratings
regarding mfi financial performance, although rating
mfis to which the apex itself is lending presents some
conflict of interest. Finally, the apex might take a lead
role in creating market-bridging instruments; for ex-
ample, as partial guarantors of mfi financial paper. To
serve as guarantor, however, skeptics note that the apex
itself must be perceived by the market as financially
sustainable by virtue of either its own financial per-
formance or higher guarantees, presumably from the
state. In many cases, moreover, apex institutions have
themselves sabotaged such bridges by offering the
mfis the addictive alternative of financing at below-
market terms.
Donor Coordination
Advocates see apexes as useful devices for shielding
mfis from the costly and often conflicting demands
of multiple donor agencies, each bringing its own
program objectives and target groups, as well as its
own processes and requirements. Donors, anxious to
show rapid benefits to their home stakeholders, may
press their client mfis to lend out their funds more
rapidly than banking prudence might advise.
In principle, the objective of reducing the heavy costs
and conflicting demands that donors inflict on fragile
management systems is broadly endorsed by micro-
finance professionals. By serving as a centralized chan-
nel for the resources flowing to the retail level, it is ar-
gued that an apex can coordinate donor programs as
well as buffer donor demands, and can work with the
donors to standardize their approaches and reporting

8requirements, thus reducing the effective costs of
their support. The skeptics, however, argue that this
has rarely if ever occurred. The donors themselves, it
is pointed out, may have little flexibility under their re-
spective mandates to alter requirements. The apexes,
consequently, have little alternative but to pass these
requirements and their costs down to the mfis, only
interjecting themselves as another (not costless) tran-
sit point in the paper flow. Moreover, to the extent
that apexes succeed in standardizing methodologies
of microfinance delivery, it is argued, they will stifle
initiative and innovation in the development of site-
appropriate approaches.
Supervision of MFIs
Some writers have suggested that apexes, given their
specialized knowledge of the particular requirements
of microfinance and their close familiarity with the in-
stitutions involved, are in an excellent position to
provide the close supervision that is needed for licens-
ing, but that is outside the reach and staffing ability of
the supervisory authorities of the formal financial sys-
tem. The skeptics counter that most apexes still lack
sufficient information access and monitoring method-
ologies to satisfy their own business needs, much less
assure prudential oversight for the microfinance sys-
tem as a whole. Even if they had such capacity, more-
over, there would inevitably be questions raised about
the evenhandedness with which they regulate their
own clients as compared to their clients’ competitors.
Also ticklish would be the position of a supervisory
apex facing the decision to close down one of its own
clients, which may have outstanding financial obliga-
tions to the apex as well as to others. In any event,
given the lack of real-life examples, this possible role
of apex institutions will not be explored further in
this paper.
III. How Have Existing Apexes Performed
the Above Roles?
Having outlined the major issues in the apex debate,
let us now see what documented experience has to say
about the expectations for apex institutions.
Do Apexes Expand the Supply of Resources
Available for Microfinance?
The answer to this question in the short term is most
likely positive. Donors, in particular the international
financial institutions (ifis), find it exceedingly difficult
to make the small loans required by individual mfis,
given their limited absorptive capacity. Without in-
termediating wholesale institutions, these lenders
would probably not make available the volumes of re-
sources they would otherwise channel to microfinance.
In most cases, apex institutions have been created in
the first instance largely to manage funds for micro-
finance from one or more ifis or bilateral lenders.
Examples include the apexes pksf in Bangladesh,
accorde (formerly cinde) in Costa Rica, FondoMicro
in Dominican Republic, ndtf (formerly jtf) in Sri
Lanka, microfinance apex units in central banks in
several Latin American countries, and, more recently,
rfc in Moldova and the lids in Bosnia-Herzegovina.
In other cases, existing second-tier institutions, such
as cofide in Peru and ifi in Colombia, have enabled
external lenders to enlarge the pool of resources at
the disposition of microfinance retailers. In both types
of situation, case studies suggest that apex activities
have been accompanied by significant growth of both
the numbers of people and microenterprises receiv-
ing credit.
Nevertheless, a number of caveats are in order. The
first involves the extent of additionality of the re-
sources channeled through the apex institution.
When the external donor contributes to the apex, is
it adding to the amount of microfinance funding
available, or only substituting for funds that would
otherwise have been available from other sources or

9through other channels? Because money is fungible
there are many means of substitution, so additional-
ity is seldom 100 percent. Box 2 outlines ways in which
additionality might erode.
The case for additionality appears strongest at the
level of the apex. Even at this level, one could argue
that the external resources being provided to the apex
might simply replace monies that donors would oth-
erwise have channeled directly to mfis, funds that the
apex would otherwise have received from the gov-
ernment,6 or monies that the apex could have raised,
albeit at higher cost, in the local financial market. In
counter-argument, apexes have often been created to
receive external funds for microfinance programs that
would not otherwise have existed. As regards non-
governmental financing, few apexes have established
sufficient creditworthiness to be able to tap local or
international financial markets. Those few apexes that
are able to borrow, such as cofide in Peru, are not
specialized in microfinance and had not been moti-
vated to intermediate such resources for microfinance
prior to the offers of earmarked resources from ex-
ternal donors.
The fungibility of resources at the level of the re-
tailing institutions is somewhat more problematic.
Here, it is useful to distinguish between licensed and
unlicensed retailers.
Licensed retailers, such as commercial banks, finance
companies, and savings and loan associations can mo-
bilize resources from depositors or financial markets.
Moreover, they are typically multipurpose lenders,
with only a small proportion of their portfolios ac-
counted for by micro-borrowers. Evaluators in a
number of the studies concluded that apex credits,
particularly when offered at below-market interest
rates, were undercutting the resource mobilization in-
centives of retailing institutions, such as BancoSol and
Caja Los Andes in Bolivia, that had clearly demon-
strated the ability to mobilize deposits and tap market
Box 2: Additionality
Characteristics of Recipient
Apex usually lacks access to
commercial funding sources.
Apex often established precisely to
receive government and/or donor
funds.
Diversified sources of financing, of
which apex resources may be a small
proportion.
Diversified loan portfolio, of which
microfinance may be a small
proportion.
Retailer typically specialized in
microfinance.
Retailer often considered
uncreditworthy by market or legally
prohibited from taking deposits or
borrowing from public.
Possibilities for Erosion of Additionality
Donor funds may substitute for government
contributions to apex.
Donor and government support to apex may replace
their direct support to MFIs.
Donor and government contributions could replace
market financing for creditworthy apexes.
Apex resources, particularly if offered on below-
market terms, could reduce recipients’ incentive to
mobilize deposits or other market-based financing.
Apex resources could substitute for monies the
recipient would otherwise have onlent from own
resources, thus freeing the latter for other uses.
Apex fund, particularly if subsidized, could
discourage MFIs from seeking financial sustainability.
Could reduce incentive to transform to a licensed
institution.
Could reduce MFIs’ motivation to seek loans from
commercial banks.
Level of Intermediation
Donor to apex
Apex to licensed retail institution
Apex to unlicensed retail institution
6 That government monies may have been substituted and reallocated to
other purposes is, of course, a possibility faced by all external aid.

10
funds. Similar erosions of resource mobilization in-
centives at the retail level have been reported in some
evaluations of apexes serving credit unions, although
increased outreach to poorer families or particular
ethnic groups has also been reported (e.g., Ecuador).
On the other hand, some private banks with signi-
ficant microfinance portfolios—e.g., Hatton Bank in
Sri Lanka—have refrained from drawing on apex
funds, preferring to rely on their own resource mo-
bilization.7
Additionality may also be reduced to the extent that
retailers use the apex funds for microfinance, while
diverting resources they would have allocated to mi-
crofinance activities to other uses. The InterAmerican
Development Bank has mounted a number of “Glob-
alMicro” projects that financed micro-lending by li-
censed retailers—banks, finance companies, and
credit unions. A 1997 evaluation of the GlobalMicro
program in El Salvador, for example, noted that the
participating institutions had entered the microcredit
market prior to the initiation of the program, and no
significant difference was found in microenterprise
access to credit between institutions participating in
the program and those not participating. In several
evaluations of GlobalMicro programs in other coun-
tries, the idb found that commercial banks were us-
ing the apex-intermediated resources in large part to
finance their traditional customers, sometimes en-
gaging in definitional manipulations to report those
customers as being within the target group stipulated
under the idb loan. In the first three years of the pro-
gram in Ecuador, the principal retailer, accounting for
60 percent of the funds used, was bnf, a state devel-
opment bank, partly because of lack of interest on the
part of the commercial banks. The evaluator con-
cluded that most of the money retailed by bnf had
gone to increase lending to old clients.8
Notable success, on the other hand, was reported
in Paraguay, where evaluators found significant in-
creases in the microfinance shares of some participat-
ing retailers’ portfolios, spurred by intense competi-
tion in the sector as a whole as well as the availabil-
ity of external funds. However, the decisive feature of
the Paraguay case was the intensive, hands-on, and
long-term nature of the technical assistance provided
to both the apex and the mfis by the German con-
sulting firm ipc, which had years of successful mi-
crofinance experience that it could bring to bear in
the Paraguayan institutions. Another positive exam-
ple is found in the expanded lending to microenter-
prises through the Municipal Savings and Loan As-
sociations (Cajas Municipales) in Peru made possible
by GlobalMicro funds intermediated by Cofide. Here,
again, intensive, long-term technical assistance from
ipc (with support from gtz) made a crucial contri-
bution. The technical assistance in these cases came
from someone with a strong track record in micro-
finance, and was substantially more intensive than the
technical assistance most apexes are prepared to offer.
With some exceptions, unlicensed retailing institu-
tions involved in microfinance tend to be specialized
in that activity, and typically do not have access to
funding from deposits or commercial resources. For
them, therefore, there is less likelihood of erosion of
additionality on the lending side. This is not univer-
sally the case, however. It is not readily apparent, for
example, that the funds provided to large, successful
ngos by pksf in Bangladesh, FundaPro and nafibo
in Bolivia, and FondoMicro in the Dominican Re-
public are not simply substituting for resources those
ngos could have attracted from other sources, in-
cluding from the very donors funding the apex. In the
case of ndtf in Sri Lanka, it was reported that some
client ngos were taking ndtf funds and putting their
own funds raised from deposits into commercial bank
7 Concerns about possible political interference are reported to have in-
hibited both formal and informal mfis from drawing on public apex
funds.
8 bnf also had the highest arrears rates of the participating retailers, and
was barred from the program after three years.

11
accounts at higher interest rates. Some case studies,
moreover, raise concerns about the impact of subsi-
dized apex funds on the incentives of recipients to
move toward financial viability, formalization and
market access.
When all is said and done, the creation of apex in-
stitutions does facilitate amassing substantial funds
for microfinance from governments, bilateral donors,
and ifis that probably would not be available in the
same amounts if those sources had to transfer them
directly to retail-level institutions instead. Despite
“leakages” of the sort described above, it seems likely
that substantial additionality is achieved through this
vehicle, at least at a point in time.
The amount of money involved, however, must be
put in the perspective of the total demand for finan-
cial services, on the one hand, and the administrative
capacity of an apex institution, on the other. While
pksf is recognized as a relatively successful apex insti-
tution, it provided only about 15 percent of micro-loan
funds in Bangladesh (not counting the microfinance
activities of government banks and ministries), ac-
cording to cdf data available as of this writing. Thus,
in the development context one must come back to
the question of sustainability. The resource flows pro-
vided by governments and external sources are in-
herently limited in amount and uncertain in duration.
The shared objectives for microfinance outreach will
only be reached if and when the needed resources are
being generated by the microfinance system itself.
Apex institutions might, in concept, be able to inject
additional resources to give a “jump start” to this
process, but apex financing alone will not assure a
successful outcome.
Is Money the Constraining Factor?
The additional financial flows that apex institutions
may facilitate are of long-term developmental conse-
quence only if retail mechanisms are developed that
assure the funds’ effective use, growth, and leverag-
ing over time. Although money may be useful for
achieving some of the necessary institutional changes,
money itself is not the primary factor inhibiting the
development of healthy microfinance systems.
A critical constraint evident in almost all the re-
viewed studies is the lack of effective retailing capac-
ity: i.e., mfis that have achieved or are likely to achieve
financial self-sustainability. A key question, therefore,
is whether apex institutions contribute significantly
to the development of sustainable microfinance re-
tailing capacity. The answer to this question is far
from clear.
In this regard, it is important to recognize that the
objective is not to maximize the number of mfis, but
rather the effective sustainable capacity of the system.
In some instances (e.g., ndtf in Sri Lanka), the num-
ber of microfinance ngos expanded rapidly after the
creation of the apex, many being formed largely to
access the subsidized resources and offering little if
any prospects of sustainability. Two kinds of evolu-
tion are notable in the case studies. In some cases
(e.g., Fundación Covelo in Honduras), a burst of cre-
ation of new mfis and/or the entry of existing ngos
and other institutions into microfinance activities was
followed by a substantial pruning of numbers, as the
institutions either failed or were dropped from the
program when the apex’s criteria tightened. In some
other cases (e.g., K-Rep in Kenya, FondoMicro in the
Dominican Republic, and Fundación Carvajal in
Colombia), institutions established as apexes discov-
ered that the number of potential qualified retailers
had been seriously overestimated, and they eventu-
ally responded by going into the retailing business
themselves. In contrast, one of the most successful of
existing apexes, pksf, serves an exceptionally large
number of affiliated retailers (174 as of May 2000, of
which 161 were active borrowers). Even so, pksf finds
itself able to work with only a small percentage of
those mfis that apply. A similarly large number of
affiliates (74 at the beginning of 2000) is served by

12
fwwb in India, but despite enormous unmet de-
mand, fwwb’s very modest resources and its focus on
the development of sound microfinance institutions
will limit its intake of new mfis to five or six per year.
Ten years after fwwb commenced apex operations,
its affiliated mfis were reaching only 18,500 clients.
Given the scarcity of well-managed retail institu-
tions in most countries, apex portfolios tend to be
highly concentrated. The extreme cases may be those
of FondoMicro and bmi (El Salvador). In the mid-
1990s, 90 percent of their loan portfolios were ac-
counted for, respectively, by ademi, one of Latin
America’s first sustainable mfis, and Financiera
Calpía. Clearly the retailers in these instances were
more important to their apexes than their apexes were
to them. Even when an apex is serving a large num-
ber of mfis, its lending tends to be concentrated
among only a few. In the GlobalMicro program in
Paraguay, two retailers in 1996 accounted for 52 per-
cent of the program, with another two accounting for
an additional 31 percent. In Ecuador, bnf, a state de-
velopment bank, used more than 60 percent of the
funds onlent by the apex cfn and accounted for al-
most half of the subloans. (Very little of this money
actually found its way to microfinance, however.) In
1998, Khula in South Africa was lending to 38 mfis.
The largest of these had a client base of over 18,000
borrowers, while the average for the rest was about
500. Of pksf’s 161 active borrowers, three (asa,
Proshika, and brac) currently account for some 56
percent of total disbursements.9 These institutions
and several other clients of pksf are so large that
their size, at least, is no obstacle to direct funding
from donors.
The Development of Retailing MFIS
The improvement and expansion of sound retailing
capacity is both the most important role ascribed to
apexes and the one whose performance is most
difficult to evaluate. As critics are quick to point out,
the relatively small number of self-sustaining mfis
found around the world suggests that apexes have not
contributed much in this regard. Moreover, national
apexes appear to have played little role in the emer-
gence of sustainable mfis that do exist; indeed, in
most cases their viability predates the apex and may
have stimulated its creation.
Some would argue that so negative a conclusion
may be premature. The achievement of financial sus-
tainability for an unlicensed institution, previously
lacking a banking philosophy and inexperienced in
banking discipline, is commonly assumed to require
three to five years or more. With respect to licensed
financial institutions, experience has shown (see be-
low) that the problems and gestation period needed
for the adoption of the new attitudes and technolo-
gies of microfinance may be equally difficult and time
consuming. Apexes themselves have required time to
establish their own internal policies and systems.
On the other hand, more than half of the apexes for
which information was gathered for this paper are
seven or more years old—long enough to show re-
sults. In any event, where quality improvements can
be seen at the retail level, it is difficult to attribute
them with confidence to the activities of the apex or
to other factors, and none of the examined case stud-
ies has attempted to develop a methodology for do-
ing that.
Despite these difficulties, it is possible to make
some observations about the efforts that different
apexes have made to strengthen the institutional ca-
pacities and financial sustainability of their client
mfis. Again, it is useful to differentiate between li-
censed and unlicensed retailing institutions.
9 In Bangladesh as of June 2000, the statistical bulletin of the Credit and
Development Forum reported a membership of 12,600,000 clients
served by Grameen Bank and 572 ngo mfis. Despite this huge number
of mfis, almost three quarters of the clients were served by the top five
alone, leaving 8 percent for the next five, 4 percent for the following ten,
and only 14 percent divided among the remaining 552 reporting mfis.

13
Capacity Building in Licensed MFIs
A number of donor agencies, most notably the idb,
have directed apex credit lines in recent years toward
licensed, regulated financial institutions, most com-
monly commercial banks or finance companies.10
Since these institutions are regulated and subject to
the prudential supervision of official agencies, finan-
cial sustainability is not a central focus of capacity-
building assistance.11 Instead, the objective is to
“open the minds” of these institutions to the poten-
tial profitability of microfinance and thereby to en-
courage adoption of the required technologies and the
expansion of outreach to the targeted populations.
Experience in this regard must be classified as dis-
appointing. There are few instances found in the case
studies where these programs led licensed financial in-
stitutions to institutionalize and independently ex-
pand their involvement in microfinance. The most
successful case, as noted above, appears to be that of
Paraguay, where a number of banks and finance com-
panies have moved energetically into microfinance
with the initial encouragement of GlobalMicro financ-
ing and associated technical assistance carried out by
the German consulting firm ipc. What is most no-
table about this example, in addition to the apparent
receptivity of the retailing institutions, was the in-
tensity and extended nature of the ipc commitment
and involvement: based on its own years of experi-
ence, ipc offered the retailers a complete “turnkey”
package of methodologies and systems. A similar ap-
proach, also with ipc, was attempted in Costa Rica
but never took hold because of the apparent lack of
interest in the participating banks.
Municipal savings and loan associations in Peru,
with the long-term technical support of gtz/ipc, and
a couple of small banks already specialized in con-
sumer finance, also responded positively in this re-
gard. In most cases, however, according to the eval-
uators of idb programs in Latin America, banks did
little if anything to introduce microfinance technol-
ogy and made no apparent long-term commitment to
the sector. Where some positive response is seen, it
was attributed more to competitive pressures in tra-
ditional markets, that forced banks to seek new lines
of business, than to the availability of external funds
and technical support.
Capacity Building in Unlicensed MFIs
Apex institutions in different countries have taken
very different approaches to their capacity-building
function, ranging from doing virtually nothing to
providing extensive training, consulting services,
transfer of software, etc. The incentives given mfis to
upgrade themselves in the desired directions have also
varied widely, ranging from a lax, almost disinterested
approach on the part of the apex to the conditioning
of loan access on acceptance of prescribed technical
assistance or training and the enforcement of strict
performance criteria.
Eligibility criteria for participating MFIS. Many
apexes have established, at least nominally, explicit
criteria for the selection of partner mfis and their
continued participation in the program (see Box 3).
From the point of view of many external donors, this
is a primary function of apexes and frees donors from
the practical as well as political difficulties of choos-
ing among competing mfis. In many cases, these cri-
teria are aimed at assuring the financial soundness of
the retailing institutions or motivating them in that
direction. Eligibility criteria may also reflect an apex’s
legal mandate or philosophical inclination to assist
particular economic subgroups. The target group for
10 Several bilateral donors, such as Germany and Canada, have tended to
work heavily with credit unions and credit union federations. For rea-
sons given earlier, these experiences have not been examined in the
preparation of this paper.
11 IDB GlobalMicro loans do typically apply eligibility criteria for par-
ticipating financial intermediaries beyond the prudential requirements
imposed by the supervisory authorities. The point is that an fi’s finan-
cial soundness is a precondition for its participation in the project, not
an objective of the project.

14
pksf, for example, is the rural landless; small farmers
are the central concern of pcfc in the Philippines;
and poor women in the case of fwwb in India. Eli-
gibility is thus limited to retailing institutions that are
similarly focused. Some apexes also limit eligibility to
particular kinds of institutions, such as commercial
banks (e.g., cfn in Ecuador and several other idb
GlobalMicro programs in Latin America), savings
and loan institutions (e.g., rfc in Moldova), credit
unions (e.g., fececam in Benin), or ngos (e.g., Fon-
doMicro in Dominican Republic). For others, all
types of retailing institutions are eligible, so long as
they are engaged exclusively or significantly in mi-
crofinance.
Additional criteria may be placed on the use of the
funds provided by particular donors. These typically
include maximum and average loan amounts in an ef-
fort to assure that the monies are directed to lower-
income borrowers. Targeted sectors or economic
groups may also be specified. To the extent that these
criteria differ from the standard criteria of the apex
institutions and the mfis, they add to the costs and
complexities of reporting and monitoring.
Most apexes working with ngos treat financial sus-
tainability as an outcome of the program itself, rather
than an entry requirement. Initial eligibility is deter-
mined on the basis of indicators that demonstrate po-
tential toward that end and, in some cases, an explicit
business plan that sets out the path for achieving it.
Continued eligibility is then monitored and deter-
mined on the basis of progress as shown by the
specified indicators. There is wide variation in the de-
gree to which financial benchmarks are rigorously
specified and enforced. When FondoMicro was started
in 1990, it was expected that some 200 mfis would
be served. The apex enforced its criteria seriously: by
1994, only three of the existing retail institutions were
found to qualify. In many cases, apex officials enjoy
considerable latitude in judging retailer performance.
This does not necessarily mean weak screening, how-
ever. Even though the eligibility criteria set out by
pksf tend to be broadly defined, it is reported that
little more than 10 percent of mfi applications for a
first disbursement are accepted.
Evidence on capacity building. Documented pro-
gress by client mfis toward financial viability would
provide some evidence of the capacity-building contri-
bution that apexes may make. Unfortunately, none of
the available case studies gathered such data, either
because it was not the focus of the study or because
the data were not available from the apex itself. A re-
cent evaluation of the cmf in Uganda does report
changed behavior on the part of affiliated mfis in the
direction of greater banking orientation. Specifically,
mfis are reported to have targeted full-cost coverage as
the basis for interest rates, implemented loan-tracking
systems, improved their accounting systems, and greatly
reduced loan arrears and loss rates as a result of cmf
training and technical assistance. A demonstrated
commitment to the introduction of “best practices”
is one of the qualifications for accessing cmf grant
funds. More than 20 grant applications were being
prepared in mid-1999 by mfis that previously re-
ceived cmf-supported technical assistance. In the case
of copeme in Peru, which works with both licensed
and unlicensed retailers, no loan or grant funds are
involved,12 and the principal motivation of clients is
the value-added they derive from the technical ser-
vices offered. Examples of these various approaches
are discussed in the following paragraphs.
The Microbanking Bulletin (mbb) maintains a data-
base on the outreach, efficiency, and finances of more
than a hundred leading mfis worldwide in order to
monitor trends and analyze the key variables affecting
12 copeme is not, therefore, considered an apex institution under the
definition adopted for this paper. It does illustrate, however, an inter-
esting approach to the support of mfi development. In addition to its
training and technical assistance support, copeme has organized a credit
bureau for the use of microlenders and a database and evaluation service
on the financial performance of mfis.

15
Box 3: Sample Eligibility Criteria for Access to Apex Financing
Country
Argentina
Bangladesh
Bosnia-Herzegovina
Ecuador
El Salvador
Moldova
Nepal
Pakistan
Paraguay
Apex
FONCAP
PKSF
LIDs
CFN
BMI
RFC
RMDC
PPAF
Central Bank
Criteria for Eligibility
Exclusive dedication to microfinance
Separate accounting
Separate, exclusively dedicated core management team
Independence from other activities, if any, of the parent institution
3-year action program for achievement of self-sustainability
External audit
For initial loan:
Experience in rural credit and focus on rural landless
Adequate governance and management structure
Good loan collection
Adequate staff resources
For subsequent disbursements:
Satisfactory utilization of previous loan
High loan recovery rate (more than 98%) from sub-borrowers
Timely repayment of loans to PKSF
Meeting reporting requirements
Expansion potential
Clear vision and commitment
Viable business plan
Accounting system meeting international standards
Adequate internal controls
Average loan size below DM 10,000
Less than 5% of portfolio overdue 30 days or more
Less than 3% write-off annually
Less than 5% of portfolio rescheduled
All costs covered by income from operations
10% of assets funded by local resources other than retained earnings
Licensed and supervised by Superintendency of Banks
No more than 8% of portfolio overdue more than 90 days
Profits equal to at least 1% of assets
Supervised by Superintendency of Banks
Arrears over 45 days, net of provisions, not exceeding 3% of portfolio
Capital is positive and above legal minimum
Funds from program cannot exceed 25% of savings and time deposits
Savings and Credit Association
In compliance with prudential regulations
Has received technical assistance in credit application and accounting
No more than 10% of loans overdue 60 days or more
Minimum of 3 years experience in microcredit operations and microsavings mobilization
Strict targeting of poor rural women (minimum of 80% women members)
Minimum of 500 active clients
Minimum of 20% balance of savings relative to outstanding loan amount
Minimum 90% loan recovery rate
Minimum net worth of Rs 250,000 and financial resources of Rs 500,000
Appropriate institutional and management capacity, competent Board of Directors,
adequate in-house training capacity, and staff trained in microfinance, accounting, and
financial management
Demonstrated effectiveness in targeting poor
On road to financial sustainability as demonstrated by business plan
Regulated by Superintendency of Banks
Overdues more than 30 days cannot exceed 10% of portfolio
Overdues more than 90 days cannot exceed 3% of portfolio
Profits not less than zero
Portfolio classified in categories C, D, and E cannot exceed 10 percent of portfolio
Capital adequacy at least 8% of risk-weighted assets

16
performance. copeme has established a similar data-
base covering its client institutions in Peru. With the
approval of the individual mfis, it will make its in-
formation available to donors and other sources of
finance. Aggregated data are published for four groups
of mfis, three which are unsupervised and differenti-
ated by lending methodology (individual, group, com-
munity banks), and the fourth consisting of regulated
institutions. Like mbb, copeme substantially adjusts
the information provided by the mfis on the basis of
international accounting standards and the imputa-
tion of a market cost of funds.13 Not surprisingly, this
adjustment of accounts has an enormous impact on
the assessment of sustainability, reflecting the avail-
ability of subsidized funds to the unlicensed mfis and
the failure of many of them to adequately provision
against loan losses. Unadjusted data for the first quar-
ter of 1999 show net earnings on loans covering, on
average, between 77 and 116 percent of operational
expenses for the four groups.14 After the adjustments,
however, the cost coverage ratios fall to between 25
and 61 percent, far short of financial sustainability.15
A recent World Bank study of 21 small and medium-
size mfis (of the 161 active retailing partners of pksf)
provides information on their current financial sta-
tus.16 All but three of the studied mfis were enjoying
substantial client growth and increasing average loan
size, both of which were contributing to falling unit
costs of operation. All but one were found to be cov-
ering all of their non-financial expenses with loan in-
come, and 18 were also covering their costs of bor-
rowing, including savings deposits. None would have
covered financial expenses, however, if pksf were charg-
ing market interest rates on its loans.17 The cost of bor-
rowing from pksf ranged from 3.0 to 4.5 percent as
compared to the 9 percent rate being charged to ngos
by one sampled commercial bank.18
Box 3: Sample Eligibility Criteria for Access to Apex Financing (con’t.)
Country
Peru
Philippines
Apex
COFIDE
PCFC
Criteria for Eligibility
Supervised by Superintendency of Banks
In conformance with all prudential regulations, legal reserve requirements, and not under
intervention
Arrears not in excess of 12.5% of gross loans and not more than 30% above average
arrears ratio for system as whole
Profits not less than zero
At least 500 microfinance clients
Ratio of capital to risk assets at least 10% (for licensed financial institutions)
Positive net operating income, excluding grants (for NGOs)
Collection rates above 90%
13 The principal adjustments made by copeme concern the establishment of
loan loss provisions in accordance with the norms of the Peruvian Superin-
tendent of Banks, marking down loans in arrears, imputing market-interest
rates to any funds received at subsidized rates, recognizing as income only
interest actually received, applying an inflation correction, and excluding in-
comes and costs not associated with the lending activity (e.g., training or
technical assistance to borrowers, programs managed for government).
14 Financial data from the Municipal Savings and Loan Institutions (Ca-
jas Municipales-cmacs) and from Mibanco, a fully licensed microfinance
bank, are not included in the calculated average ratio for the fourth cat-
egory for lack of comparable adjusted data. Their inclusion would have
improved the category average because of the better-than-average per-
formance of the cmacs.
15 It should be noted that these averages disguise large variations among
individual institutions. They also do not include the cmacs, whose mi-
crofinance portfolios have been among the better performing in Peru.
16 Of the 21 mfis sampled, 14 had more than 5,000 members, of which 6
had more than 10,000 members. All had been associated with pksf for
five or more years.
17 The sample did not include asa, one of pksf’s largest client mfis,
which is rated as financially sustainable.
18 As discussed further below, pksf also enforces a high minimum re-
lending rate on the mfis. The resultant substantial spread contributes to
the growth of mfis’ capital.

17
The above data show financial performance at one
point in time. In most instances, the apexes them-
selves may not have the information needed to make
such evaluations and to analyze progress over time.
Even when rigorous reporting requirements are set
out, evaluators report that few apexes have the nec-
essary monitoring tools to collect and analyze the in-
formation, and mfis are often not equipped to pro-
vide it. Indeed, accounting and portfolio monitoring
systems are key areas for training and technical assis-
tance. On the other hand, fairly broad and subjec-
tively stated eligibility criteria may be backed up by
tight reporting requirements and close monitoring,
including frequent site visits, and by strict contract
enforcement. This is reportedly the approach of pksf.
Most apexes require that their associated mfis sub-
mit regular reports on fund use and portfolio perfor-
mance. The accounting systems of many unlicensed
mfis are exceedingly weak, however, and definitions
often do not conform to international or even na-
tional regulatory standards. Consequently, the reports
that are generated may not give an accurate picture
of portfolio quality, capital adequacy, or financial per-
formance. The lack of basic, standardized financial in-
formation and accounts may itself be taken to suggest
that financial sustainability has not been the primary
objective of either the mfi or the apex that supports
it. In some cases, however, it may simply reflect the
long and arduous nature of creating both viable mfis
and strong apexes, including the institutionalization
of the accounting and auditing standards, and infor-
mation and control systems that are fundamental to
sound financial management.
Political and other obstacles. The case studies indi-
cate several other factors that also undercut the de-
velopment and consistent application of criteria for
mfi selection and monitoring on the part of apexes.
One is political interference. It is typical for planning
documents to assert that the proposed apex will be
insulated from political pressure, but success in this
regard is not nearly so typical. When established to
administer state programs, apex institutions are as
vulnerable as any other state agency to pressures to
give favors to the government’s political allies or to
win the support of particular voter groups. That such
problems are commonplace is indirectly reflected in
the wide praise won by pksf for the steadfast man-
ner in which, as a majority state-owned institution, it
has exercised its legal autonomy and independence of
decision making. pksf’s success in this regard has
been widely attributed to the commitment and the
national and international prominence of individuals
on its Board of Directors. Donor disbursement pres-
sure frequently militates against rigorous selection
and monitoring, by pushing disbursement rates be-
yond the capacities of the apex and its retailers. Still
further cost and confusion are added to performance
monitoring when multiple donors impose their re-
porting requirements with different coverages, for-
mats, definitions, and schedules.
ndtf, the implementing agency for a World Bank
poverty alleviation project in Sri Lanka, dramatically
illustrates these factors. The Bank’s Implementation
Completion Report, written in 1998, as well as sev-
eral independent commentaries, highlight the heavy-
handed political intervention to which that agency’s
decisions were subjected. The Report also acknowl-
edges that the project had significantly overestimated
the capacity of the retailing institutions, and had
vastly underestimated the complexity of developing
that capacity working with so many retail partners.
As a consequence of both political and disbursement
pressures, eligibility and performance criteria were ef-
fectively overwhelmed, and only a handful of the 147
mfis that drew on apex funds actually met the mini-
mum participation criteria that had been specified.
A further factor affecting financial performance, its
measurement, and the enforcement of associated stan-
dards is the frequent burdening of both mfis and
apex institutions with multiple, sometimes extraneous,

18
program responsibilities. Examples abound. FundaPro
in Bolivia carries mandates for education and envi-
ronmental protection, in addition to microfinance;
cpd in Egypt carries these same mandates plus health
programs and vocational training; nabard in India
manages a variety of specialized state funds and be-
comes involved in project implementation and the
regulation of cooperatives and rural development
banks; pksf and ndtf also administer state-directed
credit programs or funds in addition to their own
apex activities.
Both governments and donors, including interna-
tional ngos, share culpability for this multi-tasking.
The implementation of health, education and sanita-
tion programs are all legitimate and important com-
ponents in the fight against poverty, but the skills, sys-
tems, and performance criteria they require are very
different from those of microfinance. When mixed to-
gether, the financial sustainability of the microfinance
activity is, at best, obscured. State development banks
and social funds, by their nature, support a variety of
activities across sectors in their efforts to promote de-
velopment and alleviate poverty. Experience provides
a strong argument, however, that when such institu-
tions enter into the support of microfinance, clear
separation of accounts and management responsibil-
ities are needed to assure the adequate supervision of
mfi financial performance. foncap in Argentina is
the single case in which we have found such separa-
tion written into the mfi eligibility criteria.
Incentives for performance improvement. Although
the case studies do not provide evidence in this re-
gard, logic suggests that the opportunity for contin-
ued access to apex funding, when conditioned on im-
provements in performance over time, could constitute
a powerful incentive to mfis to progress toward
financial sustainability. The track record thus estab-
lished could also signal growing creditworthiness to
market-based sources of financing. The strength of
this incentive would depend on the rigor with which
the apex set and enforced performance criteria. It
would depend also on the attractiveness of apex re-
sources relative to alternative sources. If more attrac-
tive resources were available under less stringent con-
ditions, mfis might simply find it easier to go
elsewhere. A 1997 evaluation of Fundación Covelo,
for example, found that its effort to upgrade mfis was
undercut to some degree when the latter were able to
access lower-cost and more loosely conditioned donor
funds through other channels. Similar observations are
made by evaluators of K-Rep in Kenya, Finurbano in
Colombia, and accorde in Costa Rica. One evalua-
tor recommended that the apex lower its interest rate
to mfis to make its funds more competitive. The of-
fer of subsidized funds, however, runs the danger of
encouraging continued dependence, not sustainability.
Some evidence of the rigor of performance moni-
toring can be found in the numbers of mfis that are,
over time, dropped from eligibility for apex funding.
K-Rep in Kenya was working with as many as 20
mfis in the late 1980s, promoting an integrated pack-
age of assistance to microenterprises, including credit,
business training, and management assistance. Only
12 of the mfis qualified for funding, however, and by
1992 the number had been reduced to five.19 At last
report, the number of K-Rep retailers has fallen to
four, of which two reportedly might soon be dropped
for poor performance. Similarly, the 20 mfis that were
being served by Fundación Covelo in 1988 had been
cut to only five, five years later. (As noted earlier,
however, some of these may have been lured away by
more attractive lending terms from other donors.) In
a more recent example, the lids program in Bosnia-
Herzegovina began in 1996 with 17 participating
19 By this time, K-Rep itself had entered into retail microfinance in ad-
dition to its apex activities.

19
mfis. By the end of 1999, however, despite good av-
erage performance, the decision was taken to reduce
this number to eight, seven of which were reported
to have achieved operational sustainability with finan-
cial sustainability expected by mid-2000.
Although continued access to apex resources may
be a double-edged sword in motivating improved
mfi financial performance, practitioners seem agreed
that the absence of follow-up financing severely weak-
ens an apex’s ability to promote capacity building at
the retail level. The most extreme negative example is
probably that of the Community Development Pro-
gram (cpd) in Egypt, a component of the state social
fund (sfd). In this case, highly subsidized funding is
being provided to ngos on a first-come, first-served
basis, and borrowers will receive second loans only
after all those applying for first loans are served.
As an aside, the question of the ability of apex in-
stitutions to motivate mfi performance improvement
is related to another of the issues that divides practi-
tioners—whether the apex itself should be financially
sustainable. The argument on the positive side rests,
in part, on the need for mfis to perceive the apex as
a reliable source of funds and services in the future if
they are to strive to meet the requirements for con-
tinued eligibility. The continued availability of apex
funds and services, in turn, is argued to depend on
the apex’s own sustainability and future ability to tap
domestic and international financial markets. In con-
trast, an apex may quite reasonably be viewed as a
temporary institution (even if temporary may mean 15
or 20 years or more) created to play its developmen-
tal role and, in so doing, working itself out of a job.20
In some of the case studies, evaluators have taken
mfis’ repayments on their loans from the apex insti-
tution as evidence of both the formers’ overall finan-
cial performance and the latter’s sustainability. A
good record of repayment from mfis to the apex,
however, does not necessarily show that the mfis
themselves are doing well, given the fungibility of
money. In a number of cases, evaluators noted that
mfis were increasing their indebtedness to other
lenders or drawing down their capital in order to re-
pay the apex in the face of growing arrears in their
own portfolios. Examples include Finurbano, which
by 1996 was experiencing no arrears from its client
mfis despite growing portfolio problems in many of
the latter. A consultant’s study of pksf in 1999 re-
ported weakening portfolio performance in a number
of partner mfis despite a continuing exemplary re-
payment rate to the apex.
Some apex institutions offer added inducements to
good mfi performance by reducing interests rates or
converting loans to capital grants when performance
targets are met. This is the approach taken by, among
others, Fundación Covelo in Honduras, the lids in
Bosnia-Herzegovina, and the microfinance program
of Nacional Financiera in Mexico.21
Technical assistance and training. In addition to
funding, most apex institutions offer technical assis-
tance and training to their client mfis. In some cases,
mfis must take the technical support in order to qual-
ify for financial support.22 Almost all donor-financed
programs include technical assistance and training,
usually grant-financed, to both the apex and retailing
institutions (and sometimes to final borrowers, as
well). The form of the assistance varies widely, how-
ever. A common problem in many programs is the
20 In only one case, that of agepmf in Madagascar, has a “sunset clause”
been found explicitly written into an apex’s terms of reference.
21 In the case of Covelo, the principal motivation for the interest rate re-
duction may have been to retain some of the better clients who were be-
ing tempted away by the subsidized interest rates offered by other donor-
funded programs.
22 When training or technical assistance is required as a condition for get-
ting finance, it becomes extremely difficult to evaluate the worth of the
training. This is just as true for apex funding as it is for mfi microloans.

20
failure, particularly on the part of donors, to recog-
nize that the capacity-building needs of microfinance
institutions are long-term in nature, to be measured
in years, and often require hands-on day-to-day as-
sistance rather than just short courses and quick vis-
its by consultants.
Some apex institutions, such as pksf, provide in-
house training to their own staffs and/or to the staffs
and managers of mfis. Many also directly provide
consulting support for the development of manage-
ment and information systems, as well as for the
adoption of new microfinance methodologies. Oth-
ers have played a more promotional role, encourag-
ing retailers to acquire technical support and training
from specialized suppliers of such services. The apexes
in these cases will typically issue a list of certified ser-
vice providers and provide either direct cash subsidies
or vouchers for employing them. In the Paraguay
case, a single consulting firm, ipc, was hired under
the idb’s GlobalMicro program to provide these ser-
vices to all participants. The lids program in Bosnia-
Herzegovina has taken an innovative apprenticeship
approach, under which mfis initially act as agents un-
der performance-based contracts with the apex. If the
requisite lending and management skills are demon-
strated, they are capitalized and put on an indepen-
dent footing.
A common issue among practitioners is whether
the apex should take a direct responsibility for tech-
nical support or leave that activity to external service
providers. The necessary knowledge and experience
is scarce in some countries. International ngos and
consulting firms have helped to bridge this gap, but
their resources are also limited (and expensive), their
“models” may not always fit specific country circum-
stances, and few have a “turnkey” capability—i.e., a
tested methodology and experienced staff able to pro-
vide the intensive, hands-on operational guidance
that is usually required. In Bangladesh, the existence
of several large and successful mfis, with tested
“home-grown” technologies, has provided a valuable
pool of knowledge and talent available both to pksf
and to other retailing institutions.
Several problems arise when the apex itself takes on
technical assistance and training functions. The first
is the strain on the apex’s own human resources and
institutional capacity. Just managing the financial side
of its business, along with the close monitoring, su-
pervision, and control functions involved, places
heavy demands on staff and managers. A second
problem is the potential for conflict of interest if apex
staff are asked to choose among candidates for spe-
cial honors (loans in this case) when some of the can-
didates are their own students or advisees. Although
the apex may play a useful role in financing and pro-
moting technical assistance and training and in
screening service providers, there is a strong case for
maintaining a clear separation of the banking and non-
banking functions. In the first GlobalMicro program
in Colombia, both loan collection and the provision
of technical assistance were delegated to an ngo, the
latter getting paid whether or not loans were col-
lected. This arrangement left unclear the responsibil-
ity for a loan going bad and created moral hazard and
conflict of interest for the ngo. For this and other
reasons, loan performance deteriorated, and the
arrangement was changed.
The uptake of technical assistance by mfis has fre-
quently lagged behind the programs initially designed
by apexes and donors. Amounts allocated for techni-
cal assistance often end up being cancelled or reallo-
cated (e.g., the World Bank loan to ndtf and the idb
loan to Finurbano). In some cases, particularly those
in which commercial banks are the targeted retailers,
such shortfalls appear to reflect strong disinterest in, if
not active resistance to, the adoption of the new atti-
tudes, methodologies, staff incentive systems, etc., as-
sociated with microfinance. Evaluators of a number of
idb GlobalMicro programs in Latin America concluded
that little, if any, technology had been transferred after

21
several years of participation in the program, and
bank credit managers and loan officers themselves re-
ported that no changes had occurred in their proce-
dures or ways of doing business. Paraguay was noted
earlier as a marked exception to this pattern, though
it is worth reiterating that the Paraguay case involved
an intensive long-term relationship between the apex,
the retailers, and highly experienced external consul-
tants with virtually a “turnkey” transfer of proven
methodology. Such expertise is still quite scarce, and
will be simply unavailable in many settings.
More positive results appear to have been achieved
from technical assistance and training efforts pro-
grams with unlicensed mfis. Reports on a number of
apex institutions and donor lending programs (e.g.,
pksf, FondoMicro, Fundación Covelo), based in part
on responses from the mfis themselves, indicate high
levels of satisfaction and report improvements in
efficiency and overall performance (although these
improvements could not be documented by available
data.) Typical complaints from clients were that more
training was needed, and that more of it needed to be
hands-on and on-site rather than delivered in the
classroom. Some reviewers also expressed concern
that apexes and/or technical service providers some-
times pushed packaged methodologies that might or
might not be appropriate to the specific circum-
stances and could have the effect of stifling innova-
tion at the retail level.
Another issue that arises, and to which apexes in
different countries have taken different approaches, is
how nonfinancial services such as technical assistance
or training for mfis should be financed, and whether
the mfis should pay for them. Donors typically pro-
vide grant resources for these purposes, and it seems
widely agreed that the subsidization of capacity build-
ing is justified by the high social returns to such in-
vestments. On the other hand, there is some evidence
that nonfinancial services are better designed, more
competitively priced, and taken more seriously by
clients when they have to pay at least part of the
costs. In a number of cases, including GlobalMicro
programs in Latin America, the provision of training
and technical assistance has been moved from a grant
to a partially paid basis, with seemingly positive re-
sults. An approach gaining favor is to make partial
funding available—for example, through vouchers—
to be used at the mfi’s initiative. In the case of
copeme, mfis are required to pay fees covering the
full costs of training they elect to undertake. Techni-
cal assistance, however, for which copeme maintains
a roster of local and international consulting firms,
carries a starting subsidy of 50 percent, reduced pro-
gressively to 30 percent to 15 percent to zero for sub-
sequent interventions. The demand for technical ser-
vices appears to be bolstered when mfis must meet
strict performance criteria to maintain access to apex
funding or to obtain the capitalization of apex loans.
Can Apexes Build Bridges to the Financial
Markets?
Apexes have seldom been able to connect with finan-
cial markets. The construction of bridges between
mfis and financial markets becomes increasingly fea-
sible as the mfis themselves achieve or approach
financial sustainability. Licensed retailers mobilize de-
posits and tap the financial markets quite indepen-
dently of their apex relationships, and loans from the
apex often represent only a small fraction of their
overall funding. Although a number of unlicensed
mfis have raised funds in the market, this ability gen-
erally predates their associations with national apex
institutions, and there are few examples in the litera-
ture where mfis have gained access to the financial
markets as a result of the intervention of national
apex institutions.
Emprendamos is a loan guarantee program estab-
lished in 1996 by the Colombian apex, Emprender. In
its first 18 months, it had guaranteed more than us$10
million in loans, whose amounts ranged from $40,000

22
to $70,000. As of 1998, the principal acceptors of the
guarantees were development banks and large credit
unions. According to an evaluation done for idb, the
guarantee program had probably not resulted in ad-
ditional funding to the borrowing ngos and credit
unions, but might have improved the terms on which
they accessed them. The evaluator raised concern,
however, about the conflict of interest involved in ac-
cording Emprendamos guarantees to retailers that
were almost all borrowing from Emprender. This
suggests the desirability of a short-duration transition
program, under which direct lending from the apex
is ended and indirect support is introduced. In any
event, at the end of the story, the mfi’s own demon-
strated financial viability will be the principal bridge
to the market.
Have Apexes Been Successful in Aid
Coordination?
Creators of apex institutions hope they will coordi-
nate among microfinance donors, thereby bringing
stability to disbursements, consistency to policies,
and some uniformity to performance standards and
reporting requirements. Little evidence can be found
in the studies examined that such benefits have been
realized to date. A promising exception is that of cmf
in Uganda, which was reported to have had consid-
erable success in resolving differences in approach
among the several donors and in coordinating their
inputs. In many cases, apexes were apparently receiv-
ing support from only one donor, with competing
funds often flowing to other or even to the same mfis
through different channels. Many of the studies point
to the undercutting of the quality-enhancement and
sustainability efforts of the subject apex institution
(e.g., FondoMicro) by competing donor and gov-
ernment funds, particularly when being offered at
subsidized interest rates. In cases where an apex is re-
ceiving funds from multiple donors (e.g., Fundapro),
the tendency has been to maintain the separateness of
the programs and to onlend the respective funds on
different terms to the same or different mfis, accom-
panied by the different conditions and reporting re-
quirements imposed by the various donors.
IV. Sectoral Issues
Macroeconomic Stability
Apexes provide vehicles for accumulating and chan-
neling resources, but their creation does not solve
problems of macroeconomic instability, distorted in-
centives, lack of legal supports for debt recovery, poor
rural infrastructure, etc., all of which are crucial to the
efficiency and viability of financial institutions and for
financial development generally. The importance of
macroeconomic stability is well recognized, and its
implications for successful microfinance are not
markedly different than for the rest of the financial
sector. Several of the studies consulted (e.g., the
GlobalMicro program in Costa Rica) recount the
difficulties experienced by externally financed pro-
grams, as macroeconomic instability led to volatility
of interest rates, exchange rates, and relative prices,
increasing the risks faced by both borrowers and
lenders. Increased risks, coupled with deteriorating
portfolios, falling profits, and tightening liquidity, in-
hibited the expansion of loans to non-traditional
clientele and reduced the uptake of apex funds. The
ifis now generally view the macroeconomic envi-
ronment as a principal consideration in deciding
whether or not to go forward with financial sector
lending, including for microfinance.
Interest Rates
Retail Interest Rates
Among sector policy issues, perhaps none is more
germane to microfinance and to the operations of
apex institutions than interest rate policy, which mat-
ters at both the wholesale and retail levels. Without

23
retail interest rates that at least cover the operational
and financial costs of providing the services, the finan-
cial sustainability of mfis is impossible by definition.
In most of the cases reviewed, interest rates at the re-
tail level, including for microfinance, have been lib-
eralized and are now market determined. Many if not
most donors, particularly the ifis, now insist as a
condition of their support that final borrowers pay
market-determined interest rates. (Note that if the
“market” in question is the normal banking market,
then “market” interest rates will fall far short of cov-
ering actual microlending costs.) But there are still
officially sponsored credit programs that fix retail in-
terest rates generally, or the onlending rates of mfis
specifically (e.g., cpd in Egypt, nabard in India,
Khula in South Africa), well below operational costs
(and often below inflation), even without factoring
in risks, the related need to maintain adequate loan
loss provisions, and the opportunity cost of capital.
***The subsidization of credit for poverty allevia-
tion purposes is a legitimate decision for govern-
ments and donors to make, but the considerable costs
of doing so must be taken into account. These costs
go beyond the macroeconomic strains and resource
misallocations that are well documented by studies of
credit subsidies around the world. Equally important
in the long term are the negative impacts of credit
subsidies on the very extension of outreach argued to
be their principal objective. So long as mfis are un-
able to cover their costs, their continued operations
and any extension thereof remain dependent on a
growing generosity of taxpayers and donors to pay
the bill.
Where interest rates at the retail level are freely de-
termined, an important enabling condition for finan-
cial sustainability is realized, provided that costs are
also brought down to enable the requisite demand for
services. pksf imposes a minimum onlending interest
rate of 18 percent on partner retailers with the objec-
tive of promoting their financial self-sustainability.23
fwwb in India also set a minimum onlending rate (12
percent in 1997 as compared to inflation of around 7
percent). This policy put fwwb at a competitive dis-
advantage vis-à-vis the many state-financed programs
that offered negative real interest rates, but fwwb
nevertheless managed to steadily increase the number
and value of its loans, including to some of the poor-
est self-help groups. fwwb’s attractiveness to its mfi
borrowers, despite its higher interest rate, was en-
hanced by its faster response time and the quality of
its services.
Interest Rates to the MFIs
When interest rates charged by the apex on its loans
to the mfis are below the rates they would have to
pay for market sources of funds, evaluators have
found, not surprisingly, that retailers slacken in their
efforts to mobilize funds from the market. Such ob-
servations are found in studies of pksf (as regards its
larger ngo partners), Fundapro and nafibo, and
FondoMicro, among others. pksf charges higher in-
terest rates to the larger ngos to cross-subsidize
lower rates to the smaller ones. Both rates, however,
are below market and are negative in real terms. Sim-
ilar differentiations between the larger, better-estab-
lished mfis and smaller, newer ones are made by
Khula in South Africa and by the newly established
Center for Microfinance (cmf) in Uganda, but with
very different approaches. In the case of Khula, new
mfis receive zero-interest “seed” loans, financed by ex-
ternal grant funds, while existing mfis receive “con-
cessionary business loans.” In contrast, in Uganda
both the new and the established mfis will be
charged market-based rates. The rate charged the
larger mfis will be fully on market terms, while the
23 The study, cited above, of a sample of 21 of pksf’s small and medium-
size partner retail institutions showed that all but one were covering their
operating costs from loan incomes, and 18 were covering financial costs
as well. The latter continued to depend, however, on the credit subsidy
received from pksf.

24
smaller ones will pay slightly above the rate on Trea-
sury bills, thus benefiting from a lower risk premium
than the market would have assigned them. In the
case of Fundapro, different interest rates and loan
terms apply to its various operations, depending on
the original donor sources of the funds. As discussed
above, any substitution of apex for market resources
reduces the additionality of funds for microfinance
sought by both donors and apexes.
In an increasing number of cases, particularly those
financed by the ifis, the interest rates charged to the
mfis are tied to a selected benchmark rate in the
market. The cmf example is mentioned in the previ-
ous paragraph. Under the GlobalMicro program in
Ecuador, the minimum rate charged the participating
mfis was set at the average interest rate on 90-day
deposits for the banking system as a whole. In El Sal-
vador, it is determined by the average rate for 180-day
deposits, adjusted for the reserve requirement. In
Paraguay, the benchmark is the rate on 180-day certi-
ficates of deposit, adjusted by the reserve require-
ment, and in Panama the minimum rate charged by
the fis to the mfis is determined by the interbank
market rate. In all of these cases, the benchmark rate
is probably below what the unlicensed mfis would
have to pay to access the market directly, given the
higher risk premium that would be attached to them,
but the degree of subsidization is kept small. As re-
gards the licensed mfis, the additional administrative
costs associated with joining the program (e.g., re-
ports to apex and donors) may, in some instances,
make the funds unattractive. This was reported in at
least one case, that of Finurbano in Colombia.
Foreign Exchange Risk
Foreign exchange risk is an important concern when
external funds are intermediated. This question is not
discussed in many of the case studies reviewed, but in
most instances the funds are apparently passed on to
the apexes and relent by them in local currency, with
the government or central bank taking the exchange
risk. This is the case, for example, in the GlobalMi-
cro programs in Paraguay and Costa Rica and under
the World Bank loan to rfc in Moldova. An oppo-
site approach, however, is taken by Cofide in Peru,
which onlends to the mfis in US dollars at an inter-
est rate tied to the rate on 360-day dollar deposits in
Peruvian banks, plus adjustment for the reserve re-
quirement. The commercial banks participating in the
program generally also onlend in dollars, passing the
exchange risk on to the final borrowers.24 The urban
savings and loan institutions, on the other hand,
hedged the exchange risk by depositing the Cofide
funds into dollar deposit accounts in banks, against
which they borrowed in local currency for onlending
to their own clients.
V. Some Conclusions Suggested by
Experience
The purpose of this paper is not to pass definitive
judgment on whether apex institutions make impor-
tant contributions to the development of micro-
finance. As noted at the outset, the information avail-
able from secondary sources is not sufficiently detailed
or robust to support a firm answer. It seems likely
that resource flows can be augmented by apex mech-
anisms in the short term, particularly for smaller, un-
licensed mfis more distant (in economic terms) from
the market, but it is much less clear whether apexes are
likely to be successful in promoting self-sustaining
retail capacity and expediting the transition to mar-
ket-based resources. Nor does the evidence currently
available from secondary sources suggest a model
that could be expected to succeed in a wide variety
24 This strategy works for the banks, so long as the borrowers themselves
earn incomes in dollars or are otherwise able to hedge their foreign ex-
change risks. When the borrowers receive their incomes almost entirely
from the local market, however, as is typically the case with microenter-
prises, a depreciating exchange rate will quickly be reflected as growing
credit risk in bank portfolios.

25
of country situations. This section will attempt to dis-
till from the earlier discussion some of the factors that
can contribute to or detract from an apex’s success.
What is the criterion of success? Governments,
donors, and practitioners seek to expand access to mi-
crofinance services in order to enhance economic op-
portunities for poor families. This objective will not
be achieved simply by increasing the number of mfis,
or by providing additional financial resources. To be
sure, a rapid growth of microfinance resource flows is
sorely needed and desired, but the operative constraint
on microfinance today appears not to be money per se
but rather adequate, financially viable retailing capac-
ity that could leverage the limited public resources
available and provide the basis for self-sustaining growth
over time. Public interventions, therefore, whether di-
rectly or through apex institutions, should be aimed at
nurturing the development of sustainable mfis.
Timing and Numbers
Nurturing the development of sustainable mfis re-
quires time, a rigorous selection process, close labor-
intensive attention, monitoring, and a proper incen-
tive system. Limiting selection to existing licensed
financial institutions may simplify the challenge of
overall financial viability, but it does not ensure the
commitment and adoption of the methodologies nec-
essary to assure microfinance outreach and the sus-
tainable development of that market niche. By creat-
ing an apex, donors and governments can distance
themselves from having to provide these inputs and
the related selection decisions, but the “nitty-gritty”
work has to come from somewhere. When assigning
these responsibilities to an apex institution, one has
to ensure that the apex has or will acquire the neces-
sary knowledge and skills, as well as a governance
structure, management and information systems, in-
centive structure, etc. conducive to effective func-
tioning. That, in itself, is not a simple or costless task.
In particular, planning documents for apexes often
assume without question that managers with the nec-
essary blend of managerial and financial skill, in-
tegrity, and microfinance expertise can be found. In
many settings, however, there may in fact be no such
individual or group available. Thus, the question of
who will run the apex (and who will provide tech-
nical support) needs to be addressed more directly,
and at an earlier stage in the project development
process.
As noted earlier, it is not possible on the basis of
available secondary sources to measure the contribu-
tion of apex institutions to the efficiency, financial
performance and quality of services offered by their
associated mfis. In the view of some practitioners, al-
though nuts-and-bolts skills as well as software and
hardware can be passed on through training and tech-
nical assistance, the crucial point of entry of apex in-
stitutions (or direct donors) is in the selection of the
mfis to be supported. As Dr. Ahmed, the Managing
Director of pksf has written, “Selection of the right
pos (partner organizations) was the most crucial fac-
tor for pksf’s success.” Or, as Richard Rosenberg of
cgap has said from a donor perspective, “Our prin-
cipal role is to pick promising horses. For the most
part, we are bettors, not jockeys or trainers.”
The number of mfis being served by the apex in-
stitutions reviewed for this paper range from a high
of 161 for pksf to a low of four (of which two were
reportedly non-performing) in the case of K-Rep.
When the number of an apex’s client institutions falls
to very low levels, the efficiency of setting up an apex
as opposed to direct support to retailers is obviously
questionable. Nevertheless, there is no optimal num-
ber of mfis per apex; it will vary according, inter alia,
to the size of the retail market and the maturity and
quality of both the existing mfis and the apex. The pur-
pose of the question is to stress that the objective is not
to maximize the number of retailers served, but rather
to accelerate the growth of sound retailing capacity
in order to, in turn, expand as rapidly as possible the

26
access of greater numbers of poor people to sustain-
able financial services. As described above, apex pro-
grams at the outset have often proven grossly over-
optimistic in their expectations about the numbers of
retailers they would serve. The application of reason-
able selection criteria has usually eliminated all
but a small number of institutions as viable can-
didates for capacity building, and not all of those
have been interested in partnership with the apex.
It should be emphasized that expanding the num-
ber of MFIs may not be the most effective way to
expand the number of poor families served, and
indeed may be counterproductive in terms of taking
advantage of scale economies and thus reducing in-
termediation costs. It is instructive in this regard that,
of the 534 mfis in Bangladesh reporting to the Credit
Development Forum (cdf), the seven largest mfis
were serving almost 80 percent of clients as of the end
of 1999.
Nevertheless, new project proposals continue to
forecast dozens if not hundreds of mfis participating
within two or three years of program initiation. One
of the clearest recommendations to emerge from this
review is that apexes should start small, being highly
selective and limiting their intake of mfi clients, con-
sistent with the apex’s own evolving capacity to se-
lect and support the development of promising mfis.
Donors and governments need to show patience in
this process, recognizing that microfinance is another
race in which the turtle may have an advantage over
the hare.
Selection and Monitoring of MFIs
How does one identify the “promising horses”? For
those apexes that limit their clientele to licensed
financial institutions, eligibility criteria have empha-
sized financial performance and prudential norms,
tied to or building on the regulations enforced by the
national supervisory authorities. Such regulations are
intended to assure the sustainability of the supervised
institutions in order to protect their depositors and
maintain public confidence in the financial system
generally. Such criteria do not seem to have helped
very much, however, to identify a retailing institu-
tion’s interest in and aptitude for microfinance. More-
over, if the apex’s principal role is viewed to be nur-
turing the development of retail capacity, it is the
mfi’s potential that must be judged. The assessment
of potential is necessarily judgmental and may require
more experience-based “feel” and intuition than a
checklist of precise criteria.
Selecting Licensed MFIs
A number of criteria, mixing the subjective and the
objective, have been emphasized by different apexes
and microfinance practitioners in selecting licensed
retailers as partners. One is the institution’s sense of
“mission”—i.e., the nature and strength of the mfi’s
interest in serving (doing business with) the targeted
groups. Licensed financial institutions that have not
worked previously with microenterprises are usually
not very interested in that market niche. Large banks,
traditionally focused on the corporate sector, have not
often made a sustained “downgrading” commitment
with the necessary adjustment of operational method-
ologies. On the other hand, smaller banks and sav-
ings and loan institutions, previously specialized in
consumer credit and family services, have shown a
greater interest in microfinance as an extension of ex-
isting business. On the basis of my review of the apex
literature, I would venture several criteria, in addition
to financial performance and prudential standards, on
which apex institutions and their sponsors might judge
the likely commitment of commercial banks and other
licensed financial institutions (fis) to microfinance:
∫ Previous engagement in microfinance. When an fi’s
interest in microfinance is awakened only by the
availability of external resources, the interest has,
with few exceptions, not outlived the availability of

27
those resources. (As noted in the Paraguay case, how-
ever, financial liberalization and vigorous competition
for traditional clients can provide a strong motivation
to seek out new market niches.)
∫ Some prior knowledge of and demonstrated man-
agement willingness to learn international “best prac-
tices” and to adopt the requisite technology. A readi-
ness to explore new ways of reaching a new clientele
and to commit to intensive training and technical as-
sistance toward that end (as in the case of banks and
finance companies in Paraguay) provides a strong in-
dication of real interest in the microfinance market.
Otherwise, outcomes have been disappointing.
∫ Staff skills and attitudes necessary to apply the tech-
niques, including pay incentives, appropriate to this
market niche. Traditional bank staff usually find it
difficult to venture outside their offices to work with
lower-income families, so it may often be advisable
to recruit entirely new field staff for the FI’s mi-
crofinance operations.
∫ Willingness to separate microfinance from tradi-
tional business activities (e.g., separate staff and man-
agement, cost accounting, product development,
etc.).25 Given the very different attitudes, styles, and
methodologies of microfinance compared to their tra-
ditional lines of business, banks have often found it
difficult to merge the two under a common adminis-
tration and incentive system.
∫ Willingness to allocate a strong, well-respected
manager to the microfinance operation. This is often
the most important indicator of a bank’s commitment.
Selecting Unlicensed MFIS
In most countries large numbers of informal and semi-
formal organizations work with poor families and re-
gions, and many of these offer financial services, either
exclusively or as part of a package of services. Although
such organizations have not proven entirely immune
to corruption and opportunism, most are dedicated
to improving the lives of their clients. The question
of “mission”, for our purposes here, has more to do
with the long-term role they see financial services
playing in poverty reduction and their intention to
offer financial services on a sustainable basis. For an
mfi eventually to achieve sustainability, its owners,
managers, and staff must be able to combine social
concerns with the bottom-line attitude of a banker
and to relentlessly pursue the product innovations,
cost reductions, loan selection and collection tech-
niques, and internal accounting practices, information
systems, and controls essential to this objective. My
reading suggests the following criteria for the initial
selection of ngos and other nonformal mfis:
∫ Management with a track record in the provision of
financial services. Good banking is difficult under any
circumstances, and the skills are not learned overnight.
Few, if any, apexes will have the resources required to
develop successful mfis from whole cloth, and the in-
terest in microfinance should clearly predate the avail-
ability of apex funds.26
∫ Demonstrated concern for sustainable financial per-
formance, with particular attention to credit evaluation
and loan recuperation efforts. The mfi’s initial proce-
dures and financial ratios are important indicators of its
potential for financial sustainability, but perhaps more
important is the clear existence of a “collection culture”,
the adoption of proven technologies, and the intro-
duction of necessary information and control systems.
25 An interesting case in this regard is CrediAmigo in Brazil, a micro-
finance program housed in a state development bank, Banco do Nordeste
(bn). CrediAmigo branches share buildings with the regular branches of
bn, but their retail operations have entirely separate entrances and phys-
ical spaces, as well as different staff and managers, salary incentive sys-
tems, etc.
26 The negative example of ndtf in Sri Lanka, which witnessed the cre-
ation of numerous ngos for the purpose of accessing the promised fund-
ing, has been cited above.

28
∫ Indicated willingness to charge full cost-covering
interest rates, once reasonable scale has been achieved.
The unit costs of lending services can be brought down
over time, as scale grows and new methodologies are
adapted and assimilated. Realistic time-bound targets,
including interest rate adjustments, should be set in
the business plan (see below) for achieving full cost
coverage.
∫ Staff skills, attitudes, and incentives necessary to
sound microbanking practices. Taking a “hard line” on
loan recuperation and developing the credit appraisal
and risk management skills necessary to financial sus-
tainability are not easy adjustments for many ngo
staff. It may sometimes be necessary to recruit and
train new staff for the microfinance business.
∫ Segregation of microfinance from other activities
and mandates, preferably in separate institutions.
Once again, banking is a difficult business, demand-
ing specialized skills, accounting systems, etc. mfis
(and their apexes) are easily overwhelmed by multi-
ple responsibilities for social programs, training pro-
grams, etc., at the cost of properly managing their
risks and financial needs.27
∫ An explicit business plan, leading over a defined
period of time to financial sustainability. The plan
should include explicit financial projections, based on
realistic assumptions drawn from the mfi’s own ex-
perience and that of similar mfis elsewhere.
A criterion overlaying all of the factors underlined
above, for both licensed and unlicensed mfis, is the
strength and quality of the leadership provided by
directors and top managers. This is, of course, a
highly subjective element in the selection decision
and may be difficult to measure aside from the insti-
tution’s track record. Adjectives and phrases such as
dynamic, visionary, innovative, willing to experiment,
clear sense of direction, resistant to pressures contrary
to the institution’s mission, etc., are found in the lit-
erature to explain successful mfi (and apex) leadership
in Bangladesh, Bolivia, and Dominican Republic,
among others. Weak leadership is invoked as a source
of failure in many other cases. In appraising the po-
tential of mfi leaders, it is very useful to have the ad-
vice of someone who has worked with a number of
mfis that have achieved sustainability, and who thus
has a better feel for the kind of mfi management that
is required for success. An important focus is whether
a manager is willing to do the nitty-gritty things that
sustainability requires. This means not just a willing-
ness to be tough on collections, interest rate structure,
and staff salaries, but also a willingness to spend his or
her day the way bank managers spend their days, deal-
ing with systems, budgets, risk analyses, and other ac-
tivities that might seem less attractive to the typical
ngo manager than working directly with clients.
Monitoring
Whatever the initial selection criteria, many studies
underline the importance of clear, monitorable per-
formance benchmarks for determining an mfi’s con-
tinued eligibility for access to apex financing and other
support services. According to reported experience,
these are most effective in encouraging progress to-
ward sustainability when the key indicators are few,
precisely defined,28 directly associated with operational
efficiency and progress toward financial sustainability
27 In addition to loading on the management of social programs, donors,
including the ifis, often make mfis and/or apexes responsible for other
social concerns, such as environmental standards, through sub-project
evaluation and supervision. Such concerns are more appropriately left to
national law and specialized regulation. mfis and apexes lack the neces-
sary expertise, and to the extent they become the vehicles for such eval-
uations and enforcement, the main result may be to render them un-
competitive with other lenders not so encumbered.
28 Accounting results are obviously very sensitive to the definitions ap-
plied, as shown in the example cited above of the adjustments made by
copeme to adapt mfi financial statements and balance sheets to conform
with international accounting standards.

29
(e.g., rate of return on assets), and incorporated into
a time-bound institutional development plan. Particu-
lar emphasis should be given to portfolio quality in the
assessment of progress.29 The effectiveness of such in-
dicators as incentives to performance depend largely
on the credibility and objectivity of their enforcement
when making funding decisions. Nevertheless, the
apex should be allowed some flexibility in their appli-
cation to permit continuity in the relationship and the
taking of necessary adjustment measures in the face of
shortfalls from performance targets resulting from
temporary shocks (e.g., a terms of trade decline af-
fecting a large number of final borrowers or losses re-
lated to weather).
It is worth underlining that this recommended style
of monitoring, based on a few key indicators of over-
all institutional performance, is a radical departure
from the practice of many apexes and donors who fo-
cus heavily on tracking the specific uses of their funds
by the mfi, often down to the level of accounting for
individual loans.
Maximizing the Apex’s Chances for Success
A number of factors are important to the apex’s own
ability to set and enforce appropriate selection and
performance standards. Many of these are obvious
and analogous to the factors identified for predicting
success of the mfis. They include:
∫ A clear sense of mission,
∫ Management with knowledge of the microfinance
business and of international experience,
∫ Strong leadership able to resist external pressures,
∫ Segregation of microfinance from other mandates
and responsibilities,
∫ Adequate information and internal management
and control systems, and
∫ Well trained and motivated staff with appropriate
incentives.
Case studies highlight the need for apexes to enjoy
decision-making autonomy, free of political inter-
ference. Vulnerability to interference is a particular is-
sue, of course, in the case of apex institutions that are
state owned or agencies of a government administra-
tion. The worst-case example was that of ndtf cited
earlier. From the beginning, it was apparently a
hotbed of partisan politics, which sabotaged its abil-
ity to uphold selection and performance standards
and reportedly caused a number of mfis, both li-
censed and unlicensed, to steer clear of involvement
with it. In contrast, pksf is credited with strong man-
agement and directorship, which has enabled it to ex-
ercise remarkable decision-making independence.
Prudent design of apexes must be realistic in recog-
nizing the high risk of political pressures where the
government is involved. Expressions of good inten-
tions on this point in planning documents are not
enough. In most cases, a proper independence will
best be promoted by limiting as much as possible
government participation in, or control of, the board
that governs the apex.
29 Those apexes that do apply criteria of portfolio quality rely, like bank
supervisors in most countries, on past loan performance (e.g., arrears
measures) in assessing the risk of future default (see Box 3). While such
indicators provide important warning signals, they often come too late
to head off serious problems. A fuller and more timely appreciation of
portfolio quality and risks also requires forward-looking judgments and
may involve as much art as science. Such sophistication comes only with
experience. Meanwhile, repayment or arrears ratios can be relied on only
if they are based on very clear definitions and interpreted carefully. It is
instructive in this regard to note that the 90 percent loan collection rate
(amount received/amount due) considered adequate to access pcfc and
rmdc funds, would imply the loss of more than a third of an mfi’s port-
folio every year if the portfolio is of constant size and consists of six-
month loans. See “Measuring Microcredit Delinquency: Ratios Can Be
Harmful to Your Health” (cgap Occasional Paper No. 3, Washington,
D.C. 1999).

30
Finally, and perhaps most importantly, donors and
governments need to make every effort to avoid
inflated expectations and disbursement pressure,
which can make the task of a conscientious and ca-
pable apex manager exceedingly difficult. Such pres-
sure hampers the application of sound funding crite-
ria. It interferes with the orderly development of the
apex’s skills and systems. And it creates an environ-
ment in which political interference can be more
likely. Donors (especially the multilateral lending in-
stitutions) and governments often have a strong pref-
erence for large rapidly-disbursing projects; thus, in-
telligent management of disbursement pressure will
require particular discipline on their part. In situa-
tions where such discipline is not likely to prevail, an
apex funding mechanism is probably not the best
choice for supporting microfinance.
Except in the rare case where a large group of sub-
stantial, credit-worthy mfis exists at the time the apex
is set up, it is strongly recommended that initial funding
to an apex be small, with donor commitment that addi-
tional monies will be made available if and as progress is
demonstrated in expanding outreach and improving
MFIs’ financial performance. Disbursements should fol-
low, rather than try to drive, the demand from
promising mfis and the development of the apex’s
own skills and systems. All parties, including the pub-
lic, need to be educated to expect modest results from
the apex in its initial years.

31
Annex 1: Apex Institutions Included in Study
Country Institution Year Founded
Argentina FONCAP Project Coordinating Unit 1997
Bangladesh Palli Karma Sahayak Foundation (PKSF) 1990
Benin FECECAM AGeFIB 1993
Bolivia Funda-Pro 1992
NAFIBO 1996
Bosnia-Herzegovina various Local Initiatives Departments (LIDs) 1996
Colombia Banco de la República—IFI/Programa de Financiamento para la
Microempresa Urbana (Finurbano) 199030
Red WWB 1993
Fundación Carvajal 196131
Emprendamos 1996
Costa Rica ACCORDE (originally CINDE) 1982
Central Bank 199332
Dominican Republic Fondo Micro 1990
Ecuador Central Bank of Ecuador/Corporación Financiera Nacional (CFN) 199133
Egypt SFP/Community Development Program (CDP) 1992
El Salvador Central Bank of El Salvador 199434
Honduras Fundación José María Covelo 1984
India Friends of Women’s World Banking (FWWB) 198235
NABARD 1982
SIDBI 1990
RMK 1993
Kenya K-REP 1984
Madagascar AGEPMF 1999
Mexico FOGAIN 1953
Moldova Rural Finance Corporation (RFC) 1998
Nepal Rural Microfinance Development Center (RMDC) 1998
Rural Self-Reliance Fund (RSRF) 1991
Pakistan Pakistan Poverty Alleviation Fund (PPAF) 1997
Panama Fundo de Inversiones Sociales (FIS) 1997
Paraguay Central Bank of Paraguay 199236
Peru COFIDE 199537
Philippines PCFC 1995
South Africa Khula 1996
Sri Lanka JTF/NDTF 1991
Uganda Center for Microenterprise Finance (CMF) 1997
Uruguay Central Bank of Uruguay 199038
Yemen SFD 1997
30 ifi was created in 1940 to promote industrial development. The Glob-
alMicro Program began in 1991 with the Central Bank of Colombia serv-
ing as the apex. Responsibility for Finurbano was shifted from the Cen-
tral Bank to ifi in 1995.
31 Began in 1961 as a private foundation to provide a range of community
services, including municipal infrastructure, health, housing and education.
Served as a second-tier lender to microenterprises through commercial banks
from 1989 to 1993, after which it became a first-tier lending institution.
32 Date of beginning of GlobalMicro Program.
33 GlobalMicro Program began in 1991 with the Central Bank serving as
apex. The program was shifted to cfn, a long-standing state development
bank, in 1992.
34 Beginning date of GlobalMicro Program in El Salvador.
35 fwwb was originally established in 1982 but became fully operational
as a second-tier institution only in 1989.
36 Beginning date of GlobalMicro Program in Paraguay.
37 cofide was created as a state development bank. It was converted to a
strictly second-tier institution in 1993 and began supporting microfinance
activities in 1994. It became the apex for the GlobalMicro Program in 1995.
38 Beginning date of GlobalMicro Program in Uruguay.

32
Annex 2: Apex Institutions in Microfinance
Partial Listing of References39
Country
Argentina
Bangladesh
Benin
Bolivia
Bosnia- Herzegovina
Colombia
Reference
Ahmed, Salehuddin, “Creating Autonomous National and Sub-Regional Microcredit
Funds,” draft, undated.
Inter-American Development Bank, Project Completion Report.
Ahmed, Salehuddin, “Creating Autonomous National and Sub-Regional Microcredit
Funds,” draft, undated.
Credit and Development Forum, CDF Statistics, December 1999.
Nagarajan, Geetha and González-Vega, Claudio, “The Palli Karma Sahayak Foundation
(PKSF): An Apex Organization in Bangladesh,” Ohio State University, January 1998.
World Bank, “A Study on the Sustainability of Partner Organizations (POs) of Palli
Karmsa Sahayak Foundation (PKSF)”, April 22, 1999.
World Bank, Project Concept Document, March 28, 2000.
Turtiainen, Turto, “Rehabilitation of Rural Finance Institutions: The Case of Benin
Savings and Credit Cooperatives and Lessons from Other Cases,” World Bank, 1998.
World Bank, “La FECECAM-Bénin: La réhabilitation réussie du réseau des caisses
d’épargne et de crédit agricole mutuel, April 1997” (English version, June 1997).
World Bank, Project Appraisal Document, April 22, 1998.
Ouattara, Korotoumou and González-Vega, Claudio, “Microfinance Apex Organizations
in West Africa: The Case of Benin”, Ohio State University, March 1998.
Navajas, Sergio and Schreiner, Mark, “Apex Organizations and the Growth of
Microfinance in Bolivia,” Ohio State University, May 1998.
Dávalos, Mario, “Evaluación y Análisis de la Fundación para la Producción,” Microserve,
October 1996.
Ahmed, Salehuddin, “Creating Autonomous National and Sub-Regional Microcredit
Funds,” draft, undated.
“Local Initiatives Project: Microenterprise Lending in Bosnia and Herzegovina”, World
Bank, January 1999.
Consorcio Chemonics International-Econometría, “Proyecto de Fortaleciemiento
Institucional del IFI y de los Intermediarios Financieros,” July 14, 1999.
Inter-American Development Bank, Propuestas de préstamo, November 6, 1990 and
November 2, 1993.
IPC, “Revisión del Desempeño del Programa Global de Crédito para la Microempresa,”
September 1996.
39 Does not include informal memos, e-mails, and documents marked
confidential or not for citation.
Apex
FONCAP
Central Bank
PKSF
Rural S&L
Cooperatives
FECECAM
AGeFIB
PADME
NAFIBO/
Funda-Pro
Funda-Pro
LIDs
FINURBANO

33
Annex 2: Apex Institutions in Microfinance
Partial Listing of References (con’t.)
Country
Costa Rica
Dominican Republic
Ecuador
Egypt
El Salvador
Honduras
India
Indonesia
Kenya
Madagascar
Mexico
Moldova
Reference
Quiros, Rodolfo E., “Financial Apex Mechanisms: The Asociación Costarricense Para
Asociaciones de Desarrollo,” Ohio State University, June 1998.
Taborga I., Miguel and Wenner, Mark, “Costa Rica: Examen de Ejecución del Contrato
de Préstamo,” draft, March 1997.
Malhotra, Mohini, “FondoMicro: Lessons on the Role of Second-Tier Financial
Institutions in MSE Development,” GEMINI Working Paper No. 45, February 1994.
Schreiner, Mark and González-Vega, Claudio, “Dominican Republic: Analysis of the
Clients of Fondo Micro,” Ohio State University, June 1995.
Ayala Consulting, “Estudio de Caso: Programa Global de Crédito a la Microempresa
(GMC),” Inter-American Development Bank, December 2000.
Inter-American Development Bank, Project Completion Report, 2000.
Findings and recommendations of Multi-Donor Review Team, 2000.
Ayala Consulting, “Estudio de Caso: Programa Global de Crédito a la Microempresa
(GMC),” Inter-American Development Bank, December 1998.
Quiros, Rodolfo E., “Financial Apex Organizations: The Case of Fundación José María
Covelo in Honduras,” Ohio State University, January 1998.
Bhatt, Ela R., “Keynote Address,” Symposium on the Role of Apex Second-Tier
Institutions in Building the Microfinance Sector in India, January 31, 2000.
FWWB, FWWB News, January 2000.
Nagarajan, Geetha, “Friends of Women’s World Banking (FWWB): An Apex
Organization in India,” Ohio State University, January 1998.
NABARD, “Microfinance Innovations and NABARD”, 1997.
World Bank, Policy Research Working Paper, 1998.
Neill, Catherine, et al., “The Kenya Rural Enterprise Program: A Final Evaluation,”
GEMINI, September 1994.
Pederson, Glenn D. and Kiiru, Washington K., “Kenya Rural Enterprise Program: Case
Study of a Micro-Finance Scheme,” World Bank, March 1996.
World Bank, Project Appraisal Document, April 26, 1999.
Villalpando-Beni, Mario and González-Vega, Claudio, “Financial Apex Organizations:
Experiences from Mexico”, Ohio State University, February 1998.
World Bank, Project Appraisal Document, December 19, 1997.
World Bank, Supervision Mission Aide Memoire, October 1999.
Apex
ACCORDE
Central Bank
FondoMicro
CFN
SFP/CDP
Central Bank
Fundación José
María Covelo
FWWB
NABARD
PHBK
K-Rep
AGEPMF
FOGAIN
NAFIN
RFC

34
Annex 2: Apex Institutions in Microfinance
Partial Listing of References (con’t.)
Country
Pakistan
Panama
Paraguay
Peru
Philippines
South Africa
Sri Lanka
Uganda
Yemen
Apex
PPAF
FES
Central Bank
COFIDE
COPEME
PCFC
Khula
NDTF
CMF
SFD
Reference
World Bank, Project Appraisal Document, May 19, 1999.
World Bank, Project Appraisal Document, May 29, 1997.
World Bank, Supervision Mission Aide Memoire, October 1999.
World Bank, Supervision Mission Aide Memoire, March 2000.
Ayala Consulting, “Estudio de Caso: Programa Global de Crédito a la Microempresa
(GMC),” Inter-American Development Bank, December 1998.
Inter-American Development Bank, Mid-Term Evaluation, March 29, 1996.
Navajas, Sergio, “The Global Microenterprise Program in Paraguay: When Technical
Assistance Does Matter,” Ohio State University, April 1998.
COFIDE, “Programa de Fortalecimiento Institucional a las Entidades Participantes en el
Programa Global para la Microempresa: Informes de Progreso (al 30 de junio de 1998
y al 30 Diciembre de 1999).”
Consorcio Fortifica, “Programa de Asesoría y Capacitación para Instituciones Financieras
Intermediarias en sus Operaciones Microfinancieras: Informe trimestral No. 5,” October
15, 1999.
Inter-American Development Bank, Propuestas de préstamo, September 26, 1995 and
September 8, 1998.
Nunura Chully, Juán and Portocarrero Maisch, Javier, “Programa de Crédito Global a la
Microempresa: Evaluación de la I Fase y Preparación de la II,” Inter-American
Development Bank, August 17, 1998.
COPEME, “Microfinances en el Perú,” October 1999.
World Bank, Project Appraisal Document, September 23, 1998.
World Bank, Supervision Report, September 21, 1999.
Graham, Douglas et al., “Transformation of the Development Finance System in South
Africa: A Policy Discussion,” Development Bank of South Africa (draft), November 1998.
World Bank, “A Microfinance Strategy for Sri Lanka,” February 1996.
World Bank, Implementation Completion Report, June 15, 1998.
Barents Group and Weidemann Associates, “Evaluation of the USAID PRESTO Project:
Final Report,” June/July 1999.
World Bank, Project Appraisal Document, April 24, 1997.

35
Annex 2: Apex Institutions in Microfinance
Partial Listing of References (con’t.)
General Bigio, Anthony G. (ed.), “Social Funds and Reaching the Poor: Experiences and Future
Directions,” World Bank, 1998.
Brandsma, Judith and Chaouali, Rafika, “Making Microfinance Work in the Middle East
and North Africa,” World Bank, undated.
Calmeadow, The Microbanking Bulletin, various issues.
CGAP, “A Review of the World Bank’s Micro-Finance Portfolio FY91-FY96,” November
20, 1997.
Christen, Robert P., et al., “Maximizing the Outreach of Microenterprise Finance: An
Analysis of Successful Microfinance Programs,” USAID Program and Operations
Assessment Report No. 10, June 1995.
Glaessner, Phillip, et al., “Poverty Alleviation and Social Investment Funds,” World Bank,
1994.
González-Vega, Claudio, “Microfinance Apex Mechanisms: Review of the Evidence and
Policy Recommendations,” Ohio State University, August 1998.
Inter-American Development Bank, “Evaluation of Global Microenterprise Credit (GMC):
Who Gets Access to Credit? How Much Does it Cost?”, September 1998, contains
case studies of Ecuador, Paraguay, and El Salvador.
Inter-American Development Bank, “Global Microenterprise Loans: 1996 Annual Report
on Portfolio Management.”
Inter-American Development Bank, “Experiencias de apoyo a la microempresa: síntesis
de casos, Vol. 1,” January 1996 (English version, December 1997), contains cases
from Dominican Republic, Brazil, El Salvador, Nicaragua, Peru, Uruguay, Paraguay,
Bolivia, and Colombia.
Inter-American Development Bank, “Algunas experiencias de apoyo a la microempresa:
síntesis de casos, Vol. 2, January 1996, contains cases from Bolivia, Colombia,
Mexico, Argentina, Costa Rica, Chile, and Uruguay.
International Labour Organization, “ILO’s Microfinance Portfolio—An Overview,” 1999.
Malena, Carmen, “NGO Involvement in World Bank-Financed Social Funds: Lessons
Learned,” World Bank, 1997.
McGuire, Paul B., “Second-Tier Microfinance Institutions in Asia,” Small Enterprise
Development, June 1998.
Morduch, Jonathan, “The Microfinance Schism,” October 29, 1998.
Narayan, D. and Ebbe, K., “Design of Social Funds,” World Bank, 1997.
Ouattara, Koro, “Microfinance Apex Organizations: Lessons and Recommendations,”
May 1998.
World Bank, “The World Bank and Microenterprise Finance: From Concept to Practice,”
Operations Evaluation Department, November 15, 1999.
Young, Robin, et al., “Microfinance Guarantees: A Basic Primer and Review of
Experiences in Latin America and the Caribbean,” Inter-American Development Bank,
undated.

Occasional Paper
No. 6
This Occasional Paper was written
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the World Bank in a variety of oper-
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tions, covering several regions and
focusing most recently on issues
of financial sector development.
Dr. Levy holds a PhD in economics
from Yale University.
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