What types of projects does USAID use to support microfinance? What are the differences between them?

USAID supports microfinance through three types of project:

Single-purpose projects are typically funded through grants or cooperative agreements to an organization – often an international microfinance network – to provide support to a single microfinance institution or network. These projects tend to be smaller than umbrella projects and have fewer sub-obligations.

Umbrella Projects with Microfinance Components are large projects with several activities, of which microfinance is one component. For instance, a project may be designed under a humanitarian assistance strategic objective. Programming funded within that project could include support for conflict prevention, civil society building, health, and economic opportunities. Some level of support for microfinance might be included under the economic opportunities branch of programming. Thus, microfinance support is one component of a larger umbrella project.

Microfinance-only Umbrella Projects are similar to umbrella projects with microfinance components but solely work in the area of microfinance. Given the size of umbrella projects, these projects are more likely than umbrellas with microfinance components to work at all three levels identified by CGAP within the financial system; the micro-, meso-, and macro-levels. For instance, in a country with little or no regulation of microfinance, a few nascent MFIs and no coordination between organizations, a Mission may use a microfinance-only umbrella to support programming at all three levels; supporting some nascent MFIs through grants and technical assistance, creating or supporting an industry association, and working with the government to create an enabling environment that will allow the industry to implement best practices and work toward sustainability.

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