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Studying the Past, Looking to the Future: USAID’s Microfinance Experiences over the Past 25 Years: An Impression from the Field

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USAID’s Microfinance Experiences over the Past 25 Years: An Impression from the Field

By John Owens

John Owens started working as a Peace Corps volunteer managing a USAID sub-grant to the Small Business Association of Jamaica from 1988-1991. He later worked in USAID/Jamaica from 1991-1997 and USAID/Bolivia from 1997-1999 as a Microenterprise/Microfinance Specialist. Afterwards, he worked with Chemonics International on the USAID/Philippines Microenterprise Access to Banking Services (MABS) program from 1999-2012. From 2012-2013 he supported Chemonics International and several of its USAID-funded projects on digital payments. Today, he is the Senior Policy Advisor, Digital Financial Services & Other Financial Inclusion Policies, at the Alliance for Financial Inclusion (AFI).

From a field perspective, it is interesting to look back over the past 25 years to see the real global impact that USAID had on the microfinance sector and today’s new focus on financial inclusion and digital financial services. Having managed a sub-grant for USAID to the Small Business Association of Jamaica, I learned firsthand how important access to capital and a safe place to save is to low-income households. As I joined USAID/Jamaica after those three wonderful and challenging years in the Peace Corps, I wanted to make a difference. USAID provided the kind of learning and challenging work that makes a difference in this field.

After struggling for decades with targeted and directed credit programs for the rural poor and small enterprises, USAID evolved its programs in the late 1980s to focus on specialized microenterprise credit institutions, emphasizing sustainability, better accountability, measurement of progress, and later, cost-effective outreach.

When I started working with USAID, much of USAID’s focus was led by Mike Farbman who helped inspire a series of zodiac-named umbrella projects: PISCES, ARIES, and GEMINI. Industry leaders who inspired USAID in the early days were people like John Hatch at FINCA, Larry Reed at Opportunity International, Maria Otero at ACCION and individuals like Jeff Ashe.


The “Spring Review” focused on lessons learned over the failed efforts of targeted and directed credit. This, along with other research from Ohio State University, including that of Dale Adams, Claudio Gonzalez Vega, and other rural finance gurus such as Richard Meyers, Robert Vogel, and the World Bank’s J.D. Von Pischke, were all required reading in those days.

In Jamaica, USAID initially worked with small nongovernmental organization (NGO) microenterprise credit institutions supported by MEDA and Opportunity International. We spent a lot of time working with these small microenterprise credit institutions promoting effectiveness, efficiency, and sustainability. Some of the experts who advised us back then were people like Larry Reed from Opportunity International, Charles Waterfield who was into technology and big data before it was popularized by others, and inspiring lecturers like William Tucker who taught me a lot about how to become a better instructor.

While those of us in the USAID Missions learned a lot about how to support more effective microenterprise credit institutions in the late 1980s and early 1990s, there was a growing appreciation for going beyond credit to a more financial systems approach and encouraging larger, more established formal players such as credit unions and commercial banks to take the lessons learned from the NGO microenterprise credit sector and apply them to the financial sector.

We were also inspired to look at savings mobilization with mentors such as Robert Vogel, Dale Adams, and J.D. Von Pischke. It was around this time that Beth Rhyne took over the helm of the newly formed Microenterprise Development Office within USAID. It was also at this same time in 1994, that with support from USAID, the pilot for what was to become the Boulder Microfinance Training Institute took place with visionary leaders that included the founder Robert Christen and USAID’s Richard Rosenberg, Beth Rhyne, Monique Cohen, and others. I was fortunate to be one of the first from within USAID to be brought to Boulder for that pilot.

Those continuous interactions between microfinance players, practitioners, and researchers helped shift much of the focus of our work in the field away from microenterprise credit toward a broader approach to microfinance that included at that time, savings mobilization, and later many other services.

It also marked the shift toward broadening the players in this field to include banks and regulators – a discussion that eventually allowed NGO MFIs to transform into banks. Some of the first to do this included Banco Sol that USAID/Bolivia worked on quite extensively, K-REP in Kenya, and later CARD Bank in the Philippines. In the early 1990s, some Missions also started to transfer the lessons learned from specialized microfinance institutions to initiate support to banks going “down market” to serve the microfinance sector.

I had the honor of working closely with Robert Christen for several years in the mid-1990s as USAID/Jamaica supported the establishment of a microfinance unit in the Workers Savings and Loan Bank of Jamaica, a postal savings bank that had dramatic outreach across the country. With support from USAID, this bank incorporated lessons learned from microfinance players in the region like ADEMI as they planned their commercial microfinance launch. While the bank later merged with other banks to create Union Bank, the microfinance unit and their microfinance products, the Partner Savings Plan and Partner Early Draw, were transferred to the Jamaica National Small Business Loans Limited and is today considered one of the best microfinance initiatives in the English-speaking Caribbean.

USAID also coordinated closely with other donors, something that was a hallmark of many USAID and other donor-supported microfinance initiatives in the 1990s, and included donors in the field such as the Government of the Netherlands, GTZ, CIDA, and COSUDE as well as the Inter-American Development Bank. USAID always supported training initiatives for managers and officers of microfinance institutions as well as banks and credit unions that were establishing their own microfinance departments.

Several of the training efforts included working closely with local universities and institutes to establish national and regional training efforts such as the microfinance training efforts for the Caribbean that were developed in partnership with the University of Technology in Kingston, Jamaica, and setting up a microfinance managers training program with support of FundaPro, and oversight provided by microfinance industry leaders and academics such as Claudio Gonzalez Vega in La Paz, Bolivia.

Apart from attending courses and seminars, personnel in USAID Missions found other ways to keep updated and share lessons learned creatively. While in those days, no one had yet heard of blogs or social media, and the internet was limited mostly to e-mail, we learned to interact through the famous, and at times infamous, Development Finance listserv offered via Ohio State University, where Dale Adams, alias Jane, was always ready for a quick debate to challenge Missions and those of us in the field.

It was also during the 1990s that USAID began to offer training and technical assistance to financial regulators to support the expansion of microfinance. One of the first and most important USAID initiatives in the policy and regulatory area to support the expansion of regulated microfinance institutions was in Bolivia, not only to support the creation of Banco Sol but also to support the regulations and policies around Fondos Financieros Privados (FFPs) or Private Financial Funds. The FFP decree allowed specialized microfinance to transform into regulated financial institutions and mobilize deposits.

This initial work in supporting the policy and regulatory environment was followed by work in countries including Uganda with the Support for Private Enterprise Expansion and Development (SPEED) project and in the Philippines with the Credit Policy Improvement Project (CPIP) and, later, the Microenterprise Access to Banking Services (MABS) Program. While CPIP focused on the policy environment, MABS and another project, called the Credit Union Empowerment and Strengthening Project (CUES), worked primarily with the private sector to implement commercial approaches to microfinance and dramatically shift the focus of the sector.

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