UNCDF has scored 83 out of 100 points in the 2011 SmartAid for Microfinance Index (SmartAid). It ranked high in all five dimensions deemed necessary for the effective promotion of inclusive and sustainable financial sectors.  

The 2011 report identifies UNCDF as an institution with the "clear focus on pushing the frontiers of financial inclusion in some of the most difficult markets." It states that UNCDF is "well placed to develop and pioneer new initiatives" and highlights how "UNCDF's commitment to improving the effectiveness of its systems is exemplary and the responsiveness to recommendations made through SmartAid and other external or internal evaluations is impressive." 

"UNCDF is proud of this result," said David Morrison, Executive Secretary. "The 2011 SmartAid exercise confirms that we are on the right track in our efforts to improve lives by bringing affordable and sustainable financial services to some of the world's poorest countries. At the same time, where SmartAid has pointed to areas we can strengthen even further, we are committed to doing so."  

SmartAid is built on the premise that sound management systems, policies, procedures and incentives are necessary (though not sufficient) conditions for successful programmes. The Index is inspired by the ISO standards that specify requirements for state-of-the-art products and services and for good conformity assessment, as well as for managerial and organizational practice. The Index does not evaluate the on-the-ground performance of microfinance portfolios, but rather scores agencies on a framework of five elements of effectiveness—strategic clarity, staff capacity, accountability for results, knowledge management, and appropriate instruments—that capture the requirements for quality aid management throughout the project or investment cycle.     

At the Better Aid for Access to Finance meeting in 2006, 29 development leaders representing the largest microfinance funders committed to measuring the quality of their aid management in microfinance by developing and piloting this Index and signed the Compact for Better Aid for Access to Finance which set the cornerstone for the Smart Aid for the Microfinance Index.

CGAP developed SmartAid in partnership with its members and with advice from experts from the Center for Global Development, OECD, and the United Nations World Institute for Development Economics Research (WIDER) University. Six funders — AusAID, EIB, GIZ, KfW, MIF and UNCDF — participated in SmartAid participated in SmartAid 2011, increasing the total number of funders participating in the SmartAid Index to 18. 

Among UNCDF's strengths, the 2011 review highlights its "technical staff capacity and instruments in place to deliver on its strategy and support financial service providers in LDCs."

UNCDF quality assurance processes for country-level programs were found very solid and UNCDF's strategy to narrow down its work at the market infrastructure and policy levels appropriate. The primary UNCDF instrument, grant funding, was found to be well aligned with the strategy and well suited to its risk-taking approach and focus on retail institutions in least developed countries.  

The assessment points out that UNCDF has a history of supporting the next generation of sustainable financial service providers that focus on poor and low-income people. "UNCDF's specialization on microfinance, its ability to work with partners and its flexible hiring structures allow it to respond quickly to demand and market needs." 

The review also points out some areas for improvement, including the need for UNCDF to align new partnerships with strategic priorities. The report suggests that coherence between the UNCDF's traditional country-level sector approach and its newer global thematic initiatives still requires some more thinking at a strategic level, but most importantly, that UNCDF should address how the new approaches are implemented and how to facilitate staff uptake. 

While the assessment confirms that the extent to which UNCDF support leverages additional capital flows is defined as a key success indicator in the UNCDF Corporate Management Plan, and that this underlines UNCDF's role as a catalyst, it highlights that striving to be catalytic risks growth led by partnership opportunities rather than strategic vision. 

The 2011 report encourages UNCDF to strengthen performance-based elements in loan agreements and clarify use of grants for financing the portfolios of financial service providers. It points out that UNCDF should be cautious not to lose sight of its core strategy and overstretch its range of activities beyond its capacity.