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No More Financing of New MFIs

For more than a decade, Norwegian development aid money has been channeled to establishing Microfinance Institution (MFIs). Now, Norad has changed the strategy.


NEW STRATEGY:Microfinance institutions (MFIs) are getting commercial capital nowadays, and groups of lenders, such as these women in Bangladesh, will no longer get money from the Norwegian government through Norad. Photo: Lotte la Cour

Foto: Lotte la Cour

Microcredit has been a high-profile area for the Norwegian deveopment agency Norad for more than a decade. Now, the strategy has changed. With an exception for South Sudan, Norad will no longer finance new MFIs.

In the coming years, Norad will focus on evaluations, research and strengthening excisting institutions rather than funding new ones.

– Norad’s focus within microfinance will be in rising competence and building institutions that can improve the microfinance industry as a whole. This shift of focus away from directly funding projects, reflects the development in the global microfinance sector, with more competition and the addition of commercial capital, says Trond Viken, spokesman of the Norwegian Ministry of Foreign Affairs.

Well known problems

Many of the established MFIs are making money of their own these days, and do not need government funding to manage. Commercial players are entering the scene as well.

Some examples of this trend, are the insurance company Storebrand and the investment company Ferd from Norway. The need for funding in form of development aid budgets have decreased.

The Norwegian Ministry of Foreign Affairs takes care of all Norad's external communication on issues related to microfinance. Norad is not allowed to give public statements on this.

But NRK has learnt that Norad is well aware of the new research in the microfinance area, including the systematics reviews.

– Norad pays close attention to the global trends within microfinance, and this includes research on the effects of microfinance. Norad is well aware of the discussions that goes on, on the possible need for credit checks, a possible creidt register, regulations of the sector on national level and new systems to ensure openness and transparency in the sector, says Trond Viken.

NRK has on several occations tried to interview former Norwegian minister of development and environment, Erik Solheim, regarding his attitude towards microfinance. We have especially wanted to ask him about the relationship between Nobel Peace Price winner Mohammad Yunus and Grameen Bank on one side, and Norad on the other.

Among other issues, NRK wanted to know why Norwegian authorities for several years did not publish that there had been controversies over the transfer of Norwegian aid money between two Yunus-controlled companies at the end of the 1990s. NRK has reported on this issue earlier.

The former minister declined such an interview. According to his press advisors, he did not want to be interviewed by Tom Heinemann, the Danish journalist and documentary film maker who has worked on this project over a number of years.

Erik Solheim left the post as Minister of development and environment at the end of March 2012.