Madagascar - Country-level effectiveness and accountability review : Country-level effectiveness and accountability review

37823 AIDEFFECTIVENESSINITIATIVE COUNTRY-LEVEL EFFECTIVENESSANDACCOUNTABILITYREVIEW MADAGASCAR October 2005 Manuel Moyart Eric Duflos Alexia Latortue Francois Lecuyer Jennifer Isern Hubert Rauch   TABLE OF CONTENTS ACRONYMS AND ABBREVIATIONS ............................................................................................. iv ACKNOWLEDGMENTS ............................................................................................................... vii MAP OF MADAGASCAR............................................................................................................. viii EXECUTIVE SUMMARY ............................................................................................................... 1 I. BACKGROUND .................................................................................................................... 3 II. OVERVIEW OF MICROFINANCE IN MADAGASCAR ............................................................. 5 III. CHALLENGES FACING THE THREE LEVELS OF FINANCIAL SYSTEMS ................................8 Analytical Framework ..................................................................................................................... 8 Structural Fragility of Malagasy Microfinance: A Recurrent Topic .............................................. 8 MICRO ............................................................................................................................................ 8 Micro-level Strengths ...................................................................................................................... 8 Micro-level Weaknesses ................................................................................................................. 9 Micro-level Donor Recommendations .......................................................................................... 11 MESO ............................................................................................................................................ 12 Meso-level Strengths .....................................................................................................................12 Meso-level Weaknesses ................................................................................................................ 13 Meso-level Donor Recommendations ...........................................................................................14 MACRO ........................................................................................................................................ 17 Macro-level Strengths ................................................................................................................... 17 Macro-level Weaknesses ...............................................................................................................17 Macro-level Donor Recommendations ......................................................................................... 18 IV. DONOR SYSTEMS .............................................................................................................. 22 Donor System Strengths ................................................................................................................ 22 Donor System Weaknesses ........................................................................................................... 22 Donor System Recommendations ................................................................................................. 25 ANNEXES ............................................................................................................................... 28 Annex 1 Summary of Financial System Weaknesses, Donor Recommendations, and Essential Prerequisites ...................................................................................................28 Annex 2 The Risks of Subsidies and Subsidized Interest Rates--Some Examples ................... 29 Annex 3 Donor Funding Allocated to Microfinance in 2002