40 years of DAI

The Khan Bank
One of the highest-profile achievements of DAI’s banking
sector work took place in Mongolia. In 1991, after the
Democratic Revolution set socialist Mongolia on the road
to reform, the government turned a former state monopoly
institution into the Agricultural Bank of Mongolia. The experiment
failed fast, losing millions in just a few years and
leading the World Bank to call the institution “irreparably
damaged.” In 1999, with some 40,000 depositors depending
on the bank, DAI agreed to help, bringing in a team headed
up by Peter Morrow, the former CEO of the Bank of Phoenix.
The problem at the bank was a familiar one in transitioning
countries—business was done on a personal level, and the
bank customarily made corrupt “loans” that the well-connected
recipients never expected to pay off. DAI’s management
introduced badly needed financial discipline, halted
the privileged “loans,” and soon had the bank’s default rate
below 1 percent. New depositors flocked to the renamed
“Khan Bank,” which had 500,000 customers by late 2003.
It was purchased by a Japanese firm the same year. “The
American management team has done a brilliant job,” said
the new president. Putting his money where his mouth was,
he retained DAI’s management.
52
Transforming the Organization
Even as fresh faces were helping to move DAI along new
market paths in the 1990s, Mickelwait continued his longstanding
practice of sending up “solar flares” to press the
case for faster, more aggressive growth. “He always liked
to shake things up and turn things upside down from conventional
ways of thinking and doing things,” Jim Packard
Winkler recalled. The first shake-up came after the aborted
ICF merger in 1991: that fall, management directives pushed
authority and responsibility farther down into the company’s
ranks and gave line managers much more autonomy. A
year later, Mickelwait reported to the Board of Directors that
“decentralization had inspired an entrepreneurial spirit” that
explained DAI’s success in entering the Central and Eastern
Europe market. He had solid evidence to support this claim.
But there were trouble signs. For one thing, USAID was in
a weakened condition and had begun to lose many of its
senior technical personnel to retirement, without funds to hire
replacements. Its operating expense budget was aggressively
questioned and cut in successive congressional appropriations
cycles. Under the “Bush 41” and Clinton administrations,
Congress created and implemented separate funding
accounts for Central Europe and the former Soviet Union, in
each case giving the State Department control over how the
money would be programmed and spent. The implication was
that in these key transition economies, USAID was perhaps
no longer the premier development agency, and this damaged
internal morale. In the field and in Washington, DAI staff
learned to roll with the punches, empathizing with their clients
and demonstrating that the firm was a reliable partner to the
agency in its difficult times.
The start of the Clinton administration in 1993 brought different
priorities, some expectations of increased attention