This Country-Level Effectiveness andAccountability Review (CLEAR) examines the efficacy ofmicrofinance aid in Madagascar, based on an objectiveanalysis of donor assistance for the sustainable developmentof financial systems targeting the poor. The three levels ofthe financial system are the micro level (e.g., retailinstitutions), the meso level (e.g., apex, technical serviceproviders), and the macro level (e.g., regulations andpolicies). At the micro level, there is a large number ofstakeholders, and an increasing interest of banks andprivate investors, including a predominant stake by theDecentralized Financial Systems (DFS), as well as majorroles by the local Savings Institution and the Post Office.At the meso level, there is a supply of services such asauditing. Finally, at the macro level, coordination andsupervision exist, and a specific legal framework onmicrofinance is in place. Notwithstanding, microfinance inMadagascar remains weak, and, concerns suggest DFSs carrystructural weaknesses at various levels. Additionally, it isspecified services in support of microfinance are stillrare, and its quality it debatable. Professionalorganizations need to be strengthened, particularly as lackof reliable information on financial results is concerned.At the macro level, supervisory and coordinating agenciesrely on limited means, whereas the legal framework is notfully supportive. Risks suggest potential market disruptionsresulting from subsidies and interest rate hikes, animplication by which the Ministry of Agriculture not alwaysagrees with the Microfinance National Strategy. Finally, thejudicial system does not rely enough in favor of thedevelopment of the financial sector.
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