Second tier microfinance institutions are those which channel funds from the government and/or donor agencies to individual "retail" MFIs at concessional interest rates. This article reviews the experience of such institutions in a number of South and Southeast Asian countries
Th findings of the study include:
* Second tier institutions can effectively channel government and donor agencies' support to MFIs,
* These institutions can make the microfinance sector more effective by setting and enforcing performance and reporting standards,
* Such institutions can monitor and evaluate MFIs performance for government and donor agencies,
* An effective second tier insitution can also ensure MFIs operate on a level playing field.
Improving the efficacy of MFI roles means establishing and adhering to rigourous standards in more countries. Authors state that second tier institutions should:
* Not expand too rapidly and avoid restrictive interest rate policies,
* Fund scaling-up institutional development and equity as well as lending,
* Avoid becoming politicised.
