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How Microfinance Associations add value - 2 Observations with references from the Association of MFIs of Uganda (AMFIU)

Schmidt, Oliver (2008): How Microfinance Associations add value - 2 Observations with references from the Association of MFIs of Uganda (AMFIU). Published in: Microfinance Gateway No. Online (23. January 2008)

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Abstract

There are manifold reasons for microfinance association; the most common ones are advocacy, information, capacity building. However, the one unifying rationale of this organisational type appears to be wanting. The following paper makes two cases about the rationale of MF associations: 1. MF associations should NOT be regulatory bodies. In Uganda and elsewhere, there is a tendency to transform associations into apexes, to use them for regulation tasks. This is based on two motives: On the one hand, due to under-conceptualisation of associations, their promoters tend to see a promising opportunity in some regulatory role; its impact is often not well understood or neglected. On the other hand, some government agencies that lack resources and reliable systems for fulfilling regulatory tasks tend to see apexes as a convenient "quick fix." 2. The competitive edge of MF associations lies in improving informational efficiency of the Microfinance sector. MF associations are uniquely positioned to compile data for creation of information – e. g. performance monitoring – that are barred to any other organisation. MF associations should be built around that objective and judged by it. Many interventions oscillate around partial issues of informational efficiency, e. g. credit reference and rating services. Yet, its conceptualisation has been curiously neglected by development partners. Consequently appreciation has been insufficient regarding the specific, impressive management demands faced by MF associations. These are the conclusions of over 2 years working with AMFIU. AMFIU, the microfinance association of Uganda, has been commended as one of the leading MF associations of Africa. AMFIU grew its membership and expanded its operations impressively. In its 12th year of existence, AMFIU membership represents about three quarter of the Ugandan microfinance sector in terms of portfolio and client outreach.

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