9. In Bolivia, the microfinance NGO Fundaci6n para la Promoci6n y Desarollo de la Microempresa (PRODEM) sought to scale up and transform into a licensed commercial bank in order to fund microfinance operations from retail and wholesale deposits. Through BancoSol PRODEM was able to quickly expand its client base from 14,300 active/repeat borrowers in four PRODEM branches/offices in 1991 to more than 80,000 active loan accounts and 50,000 savings deposit accounts in more than 3 dozen branches/offices of BancoSol by 1998. BancoSol (Banco Solidario, S.A. (Bolivia))has captured about 20% of Bolivia's potential market for microfinance. The PRODEM/Bancosol experience induced several developments that have been beneficial for Bolivia's poor households and its microfinance industry.'

- First, the Bolivian bank regulatory authority recognized the importance of the regulatory environment on microfinance development and made room for new category of regulated MFIs - the Private Finance Fund.

- Second, BancoSol's success in the banking industry induced other commercial banks to adjust their market positioning and product offerings in order to compete with BancoSol.

- Finally, the successful experience encouraged other Bolivian NGO-MiFIs such as AgroCapital and ProMujer to develop their own institutional transformation to regulated institutions.

- 10. The successful transformation achieved by PRODEM/BancoSol served to encourage other NGOMFIs around the world like K-REP (Kenya), ADEMI and ADOPEM (Dominican Republic) to design their own transformation to gain the capability to fund expansion by mobilizing deposits and accessing the capital markets. Transformation has enabled a Philippine NGO, the Center for Agriculture and Rural Development (CARD), to move its client base of 23,000 women in rural villages into its CARD Rural Bank subsidiary which has expanded outreach on a sustainable basis to almost 40,000 repeat borrowers and savers in less than four years.

11. The Bangladesh MFI Grameen Bank has a very extensive outreach. Equally well known is the _unit desa_ network of BRI. While BRI is a state-owned commercial bank, the _unit desa_ microfinance operation has had the management and operating autonomy typically found only in private sectorowned banks - there are no subsidies from the central government, and no cross-subsidies from BRI's other commercial banking operations. The _unit desa_ microfinance system has more than 2 million active loan accounts and more than 12 million depositors. In many respects, Egypt has a similar approach and experience with the microfinance program of its National Development Bank. In both the cases of Indonesia and Egypt, it is important to note that (i) the microfinance programs in the state-owned institutions were given management and operating autonomy more commonly associated with private sector-owned institutions; and (ii) the government institutions and the policy that informed the microfinance operations eschewed subsidy mechanisms.

12. A principal lesson from the experience of successful MFIs in other countries is the importance of _sequencing._ In this context, the priority area to address is the policy environment, legal system and regulatory framework for microfinance. When the vision and strategy for microfinance are well defined and articulated, the capacity development needs of different microfinance players are more easily identified and an action program for building up the institutional capacity crafted. These prior steps facilitate the entry of donors who can focus their technical assistance programs to the identified needs of players with the potential for outreach and financial sustainability.

> _Reference: From data and information available in various CGAP Focus Notes._

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