Case Study

FondoMicro: Lessons on the Role of Second-tier Financial Institutions in MSE Development

A case study of a second-tier financial institution set-up as part of a development project

This paper explains the workings of a second-tier financial institution, FondoMicro, on micro-and small-scale enterprise (MSE) finance in the Dominican Republic. FondoMicro wholesales donor, government and commercial funds to NGOs for micro-enterprise credit programs, and also provides technical assistance. The aim of this USAID-funded project was to increase capacity of local financial markets to address the needs of the MSE sector on market terms. The paper outlines:

  • Design and objectives of FondoMicro;
  • Project assumptions and the disparity between assumptions and reality;
  • Implementation experience;
  • Future directions for FondoMicro asking, if we knew then what we know now, what would we do differently?

It also addresses broader issues about the role of second-tier financial institutions in MSE development.