A multilateral donor triumphs over disbursement pressure: the story of microfinance at Banco do Nordeste in Brazil

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The CrediAmigo microfinance program mounted by Brazil’s Banco do Nordeste (BN) shows how an international financial institution like the World Bank can be a useful catalyst in the development of microfinance retail capacity. The World Bank’s patient, phased support to BN as it designed, launched, and nurtured CrediAmigo goes against the common perception that multilateral banks always focus on large near-term disbursements to the detriment of longer-term capacity building. Progress so far suggests some important lessons for multilateral donors in microfinance:

  1. Outcomes may be better when large lending follows, rather than precedes, the development of proven retail capacity.
  2. Freedom from dogmatic presuppositions (for instance, “large state-owned banks can never do good microfinance”) allows an opportunistic approach that is more likely to yield results.
  3. After proper pilot work, a bank with a large pre-existing branch network can roll out microfinance much more rapidly than a new microfinance-only institution.
  4. Generalist donor staff working on microfinance activities should get a basic grounding in the elements of sustainable microfinance, preferably through training or, at a minimum, close work with specialists.
  5. Donors can be effective with a limited technical role – setting benchmarks consistent with international best practice, and putting the client institution in contact with top microfinance practitioners.
  6. When setbacks occur along the way but the client’s institutional commitment to the program’s objectives is strong, keeping the focus on the commitment can prevent overreaction to the setback.

This is an excellent case study of sensible donor intervention which enabled a bank to introduce profitable micro financial services into its portfolio. Connecting them to advisers, arranging study tours for senior managers, supporting loan officer training and information system development, and other similar measures exemplify the kind of help they were given.

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