Microfinance

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Community-based savings bank in Cambodia. There is a rich variety of financial institutions serving poor people.

Microfinance is the provision of financial services to low-income clients or solidarity lending groups
including consumers and the self-employed, who traditionally lack access to banking and related
services.
More broadly, it is a movement whose object is "a world in which as many poor and near-poor
households as possible have permanent access to an appropriate range of high quality financial
services, including not just credit but also savings, insurance, and fund transfers."[1] Those who
promote microfinance generally believe that such access will help poor people out of poverty.
Contents
[hide]

1 Challenges
2 Boundaries and principles
3 Debates at the boundaries
4 Financial needs of poor people
5 Ways in which poor people manage their money
6 Current scale of microfinance operations
7 "Inclusive financial systems"

8 Microcredit and the web

9 Evidence for reducing poverty
10 Microfinance and Social Interventions
11 Other criticisms
12 Bibliography
13 See also
14 Notes
15 External links

[edit]Challenges
Traditionally, banks have not provided financial services, such as loans, to clients with little or no cash
income. Banks incur substantial costs to manage a client account, regardless of how small the sums of
money involved. For example, although the total gross revenue from delivering one hundred loans
worth $1,000 each will not differ greatly from the revenue that results from delivering one loan of
$100,000, it takes nearly a hundred times as much work and cost to manage a hundred loans as it
does to manage one. The fixed cost of processing loans of any size is considerable as assessment of
potential borrowers, their repayment prospects and security; administration of outstanding loans,
collecting from delinquent borrowers, etc., has to be done in all cases. There is a break-even point in
providing loans or deposits below which banks lose money on each transaction they make. Poor
people usually fall below that breakeven point. A similar equation resists efforts to deliver other
financial services to poor people.
In addition, most poor people have few assets that can be secured by a bank as collateral. As
documented extensively by Soto and others, even if they happen to own land in the developing world,
they may not have effective title to it.[2] This means that the bank will have little recourse
against defaulting borrowers.
Seen from a broader perspective, the development of a healthy national financial system has long
been viewed as a catalyst for the broader goal of national economic development (see for
example Alexander Gerschenkron, Paul Rosenstein-Rodan, Joseph Schumpeter, Anne Krueger ).
However, the efforts of national planners and experts to develop financial services for most people
have often failed in developing countries, for reasons summarized well by Adams, Graham & Von
Pischke in their classic analysis 'Undermining Rural Development with Cheap Credit'. [3]
Because of these difficulties, when poor people borrow they often rely on relatives or a
local moneylender, whose interest rates can be very high. An analysis of 28 studies of informal money
lending rates in 14 countries in Asia, Latin America and Africa concluded that 76% of moneylender

rates exceed 10% per month, including 22% that exceeded 100% per month. Moneylenders usually
charge higher rates to poorer borrowers than to less poor ones. [4] While moneylenders are often
demonized and accused of usury, their services are convenient and fast, and they can be very flexible
when borrowers run into problems. Hopes of quickly putting them out of business have proven
unrealistic, even in places where microfinance institutions are active. [citation needed]
Over the past centuries practical visionaries, from the Franciscan monks who founded the communityoriented pawnshops of the 15th century, to the founders of the European credit union movement in the
19th century (such as Friedrich Wilhelm Raiffeisen) and the founders of the micro credit movement in
the 1970s (such as Muhammad Yunus) have tested practices and built institutions designed to bring
the kinds of opportunities and risk-management tools that financial services can provide to the
doorsteps of poor people.[5] While the success of theGrameen Bank (which now serves over 7 million
poor Bangladeshi women) has inspired the world, it has proved difficult to replicate this success. In
nations with lower population densities, meeting the operating costs of a retail branch by serving
nearby customers has proven considerably more challenging. Hans Dieter Seibel, board member of
the European Microfinance Platform, is in favour of the group model. This particular model (used by
many Microfinance institutions) makes financial sense, he says, because it reduces transaction costs.
Microfinance programmes also need to be based on local funds. Local Roots
Although much progress has been made, the problem has not been solved yet, and the overwhelming
majority of people who earn less than $1 a day, especially in the rural areas, continue to have no
practical access to formal sector finance. Microfinance has been growing rapidly
with $25 billion currently at work in microfinance loans.[6] It is estimated that the industry needs $250
billion to get capital to all the poor people who need it. [6] The industry has been growing rapidly, and
concerns have arisen that the rate of capital flowing into microfinance is a potential risk unless
managed well.[7]

[edit]Boundaries

and principles

Poor people borrow from informal moneylenders and save with informal collectors. They receive loans
and grants from charities. They buy insurance from state-owned companies. They receive funds
transfers through formal or informal remittance networks. It is not easy to distinguish microfinance from
similar activities. It could be claimed that a government that orders state banks to open deposit
accounts for poor consumers, or a moneylender that engages in usury, or a charity that runs a heifer
pool are engaged in microfinance. Ensuring financial services to poor people is best done by
expanding the number of financial institutions available to them, as well as by strengthening the
capacity of those institutions. In recent years there has also been increasing emphasis on expanding
the diversity of institutions, since different institutions serve different needs.

Some principles that summarize a century and a half of development practice were encapsulated in
2004 by Consultative Group to Assist the Poor (CGAP) and endorsed by the Group of Eight leaders at
the G8 Summit on June 10, 2004:[5]
1.

Poor people need not just loans but also savings, insurance and money transfer services.

2.

Microfinance must be useful to poor households: helping them raise income, build up assets
and/or cushion themselves against external shocks.

3.

"Microfinance can pay for itself."[8] Subsidies from donors and government are scarce and
uncertain, and so to reach large numbers of poor people, microfinance must pay for itself.

4.

Microfinance means building permanent local institutions.

5.

Microfinance also means integrating the financial needs of poor people into a country's
mainstream financial system.

6.

"The job of government is to enable financial services, not to provide them." [9]

7.

"Donor funds should complement private capital, not compete with it."[9]

8.

"The key bottleneck is the shortage of strong institutions and managers." [9] Donors should
focus on capacity building.

9.

Interest rate ceilings hurt poor people by preventing microfinance institutions from covering
their costs, which chokes off the supply of credit.

10.

Microfinance institutions should measure and disclose their performance both financially
and socially.

Microfinance is considered as a tool for socio-economic development, and can be clearly distinguished
from charity. Families who are destitute, or so poor they are unlikely to be able to generate the cash
flow required to repay a loan, should be recipients of charity. Others are best served by financial
institutions.

[edit]Debates

at the boundaries

There are several key debates at the boundaries of microfinance.

Practitioners and donors from the charitable side of microfinance frequently argue for restricting
microcredit to loans for productive purposessuch as to start or expand a micro enterprise. Those from
the private-sector side respond that because money is fungible, such a restriction is impossible to
enforce, and that in any case it should not be up to rich people to determine how poor people use their
money.
Perhaps influenced by traditional Western views about usury, the role of the traditional moneylender
has been subject to much criticism, especially in the early stages of modern microfinance. As more

poor people gained access to loans from micro credit institutions however, it became apparent that the
services of moneylenders continued to be valued. Borrowers were prepared to pay very high interest
rates for services like quick loan disbursement, confidentiality and flexible repayment schedules. They
did not always see lower interest rates as adequate compensation for the costs of attending meetings,
attending training courses to qualify for disbursements or making monthly collateral contributions. They
also found it distasteful to be forced to pretend they were borrowing to start a business, when they
were often borrowing for other reasons (such as paying for school fees, dealing with health costs or
securing the family food supply). [10] The more recent focus on inclusive financial systems (see section
below) affords moneylenders more legitimacy, arguing in favor of regulation and efforts to
increase competition between them to expand the options available to poor people.
Modern microfinance emerged in the 1970s with a strong orientation towards private-sector solutions.
This resulted from evidence that state-owned agricultural development banks in developing countries
had been a monumental failure, actually undermining the development goals they were intended to
serve (see the compilation edited by Adams, Graham & Von Pischke).[3] Nevertheless public officials in
many countries hold a different view, and continue to intervene in microfinance markets.
There has been a long-standing debate over the sharpness of the trade-off between 'outreach' (the
ability of a microfinance institution to reach poorer and more remote people) and its 'sustainability' (its
ability to cover its operating costsand possibly also its costs of serving new clientsfrom its
operating revenues).[11] Although it is generally agreed that microfinance practitioners should seek to
balance these goals to some extent, there are a wide variety of strategies, ranging from the minimalist
profit-orientation of BancoSol in Bolivia to the highly integrated not-for-profit orientation
of BRAC in Bangladesh. This is true not only for individual institutions, but also for governments
engaged in developing national microfinance systems.
Microfinance experts generally agree that women should be the primary focus of service delivery.
Evidence shows that they are less likely to default on their loans than men. Industry data from 2006 for
704 MFIs reaching 52 million borrowers includes MFIs using the lending methodology (99.3% female
clients) and MFIs using individual lending (51% female clients). The delinquency rate for solidarity
lending was 0.9% after 30 days (individual lending3.1%), while 0.3% of loans were written off
(individual lending0.9%).[12] Because operating margins become tighter the smaller the loans
delivered, many MFIs consider the risk of lending to men to be too high. This focus on women is
questioned sometimes, however. A recent study of microenterpreneurs from Sri Lanka published by
the World Bank found that the return on capital for male-owned businesses (half of the sample)
averaged 11%, whereas the return for women-owned businesses was 0% or slightly negative. [13]

Microfinancial services may be needed everywhere, including the developed world. [citation needed] However,
in developed economies intense competition within the financial sector, combined with a diverse mix of
different types of financial institutions with different missions, ensures that most people have access to
some financial services.[citation needed] Efforts to transfer microfinance innovations such as solidarity
lendingfrom developing countries to developed ones have met with little success. [14]

[edit]Financial

needs of poor people

Financial needs and financial services.

In developing economies and particularly in the rural areas, many activities that would be classified in
the developed world as financial are not monetized: that is, money is not used to carry them out.
Almost by definition, poor people have very little money. But circumstances often arise in their lives in
which they need money or the things money can buy.
In Stuart Rutherfords recent book The Poor and Their Money, he cites several types of needs:[15]

Lifecycle Needs: such as weddings, funerals, childbirth, education, homebuilding, widowhood,

old age.

Personal Emergencies: such as sickness, injury, unemployment, theft, harassment or death.

Disasters: such as fires, floods, cyclones and man-made events like war or bulldozing of
dwellings.

Investment Opportunities: expanding a business, buying land or equipment, improving

housing, securing a job (which often requires paying a large bribe), etc.

Poor people find creative and often collaborative ways to meet these needs, primarily through creating
and exchanging different forms of non-cash value. Common substitutes for cash vary from country to
country but typically include livestock, grains, jewellery and precious metals.

As Marguerite Robinson describes in The Microfinance Revolution, the 1980s demonstrated that
"microfinance could provide large-scale outreach profitably," and in the 1990s, "microfinance began to
develop as an industry" (2001, p. 54). In the 2000s, the microfinance industry's objective is to satisfy
the unmet demand on a much larger scale, and to play a role in reducing poverty. While much
progress has been made in developing a viable, commercial microfinance sector in the last few
decades, several issues remain that need to be addressed before the industry will be able to satisfy
massive worldwide demand. The obstacles or challenges to building a sound commercial microfinance
industry include:

Inappropriate donor subsidies

Poor regulation and supervision of deposit-taking MFIs

Few MFIs that meet the needs for savings, remittances or insurance

Limited management capacity in MFIs

Institutional inefficiencies

Need for more dissemination and adoption of rural, agricultural microfinance methodologies

[edit]Ways

in which poor people manage their money

Saving up

Rutherford argues that the basic problem poor people as money managers face is to gather a 'usefully
large' amount of money. Building a new home may involve saving and protecting diverse building
materials for years until enough are available to proceed with construction. Childrens schooling may
be funded by buying chickens and raising them for sale as needed for expenses, uniforms, bribes, etc.
Because all the value is accumulated before it is needed, this money management strategy is referred
to as 'saving up'.[citation needed]
Often people don't have enough money when they face a need, so they borrow. A poor family might
borrow from relatives to buy land, from a moneylender to buy rice, or from a microfinance institution to
buy a sewing machine. Since these loans must be repaid by saving after the cost is incurred,

Rutherford calls this 'saving down'. Rutherford's point is that microcredit is addressing only half the
problem, and arguably the less important half: poor people borrow to help them save and accumulate
assets. Microcredit institutions should fund their loans through savings accounts that help poor people
manage their myriad risks.[citation needed]

Saving down

Most needs are met through mix of saving and credit. A benchmark impact assessment ofGrameen
Bank and two other large microfinance institutions in Bangladesh found that for every $1 they were
lending to clients to finance rural non-farm micro-enterprise, about $2.50 came from other sources,
mostly their clients' savings.[16] This parallels the experience in the West, in which family businesses
are funded mostly from savings, especially during start-up.
Recent studies have also shown that informal methods of saving are unsafe. For example a study by
Wright and Mutesasira in Uganda concluded that "those with no option but to save in the informal
sector are almost bound to lose some money probably around one quarter of what they save
there."[17]
The work of Rutherford, Wright and others has caused practitioners to reconsider a key aspect of the
microcredit paradigm: that poor people get out of poverty by borrowing, building microenterprises and
increasing their income. The new paradigm places more attention on the efforts of poor people to
reduce their many vulnerabilities by keeping more of what they earn and building up their assets. While
they need loans, they may find it as useful to borrow for consumption as for microenterprise. A safe,
flexible place to save money and withdraw it when needed is also essential for managing household
and family risk.[citation needed]

[edit]Current

scale of microfinance operations

No systematic effort to map the distribution of microfinance has yet been undertaken. A useful recent
benchmark was established by an analysis of 'alternative financial institutions' in the developing world
in 2004.[18] The authors counted approximately 665 million client accounts at over 3,000 institutions
that are serving people who are poorer than those served by the commercial banks. Of these

accounts, 120 million were with institutions normally understood to practice microfinance. Reflecting
the diverse historical roots of the movement, however, they also included postal savings banks (318
million accounts), state agricultural and development banks (172 million accounts),
financialcooperatives and credit unions (35 million accounts) and specialized rural banks (19 million
accounts).
Regionally the highest concentration of these accounts was in India (188 million accounts representing
18% of the total national population). The lowest concentrations were in Latin American and
the Caribbean (14 million accounts representing 3% of the total population) and Africa(27 million
accounts representing 4% of the total population, with the highest rate of penetration in West Africa,
and the highest growth rate in Eastern and Southern Africa

[19]

). Considering that most bank clients in

the developed world need several active accounts to keep their affairs in order, these figures indicate
that the task the microfinance movement has set for itself is still very far from finished.
By type of service "savings accounts in alternative finance institutions outnumber loans by about four
to one. This is a worldwide pattern that does not vary much by region." [20]
An important source of detailed data on selected microfinance institutions is the MicroBanking Bulletin,
which is published by Microfinance Information Exchange. At the end of 2009 it was tracking 1,084
MFIs that were serving 74 million borrowers ($38 billion in outstanding loans) and 67 million savers
($23 billion in deposits).[21]
As yet there are no studies that indicate the scale or distribution of 'informal' microfinance
organizations like ROSCA's and informal associations that help people manage costs like weddings,
funerals and sickness. Numerous case studies have been published however, indicating that these
organizations, which are generally designed and managed by poor people themselves with little
outside help, operate in most countries in the developing world. [22]
Help can come in the form of more and better qualified staff, thus higher education is needed for
microfinance institutions. This has begun in some universities, as Oliver Schmidt describes. Mind the
management gap

[edit]"Inclusive

financial systems"

The microcredit era that began in the 1970s has lost its momentum, to be replaced by a 'financial
systems' approach. While microcredit achieved a great deal, especially in urban and near-urban areas
and with entrepreneurial families, its progress in delivering financial services in less densely populated
rural areas has been slow.
The new financial systems approach pragmatically acknowledges the richness of centuries of
microfinance history and the immense diversity of institutions serving poor people in developing world

today. It is also rooted in an increasing awareness of diversity of the financial service needs of the
worlds poorest people, and the diverse settings in which they live and work.
Brigit Helms in her book 'Access for All: Building Inclusive Financial Systems', distinguishes between
four general categories of microfinance providers, and argues for a pro-active strategy of engagement
with all of them to help them achieve the goals of the microfinance movement. [23]
Informal financial service providers
These include moneylenders, pawnbrokers, savings collectors, money-guards,
ROSCAs, ASCAs and input supply shops. Because they know each other well and live in the
same community, they understand each others financial circumstances and can offer very
flexible, convenient and fast services. These services can also be costly and the choice of
financial products limited and very short-term. Informal services that involve savings are also
risky; many people lose their money.
Member-owned organizations
These include self-help groups, credit unions, and a variety of hybrid organizations like
'financial service associations' and CVECAs. Like their informal cousins, they are generally
small and local, which means they have access to good knowledge about each others'
financial circumstances and can offer convenience and flexibility. Since they are managed by
poor people, their costs of operation are low. However, these providers may have little
financial skill and can run into trouble when the economy turns down or their operations
become too complex. Unless they are effectively regulated and supervised, they can be
'captured' by one or two influential leaders, and the members can lose their money.
NGOs
The Microcredit Summit Campaign counted 3,316 of these MFIs and NGOs lending to about
133 million clients by the end of 2006.[24]Led by Grameen
Bank and BRAC in Bangladesh, Prodem in Bolivia, and FINCA International, headquartered in
Washington, DC, these NGOs have spread around the developing world in the past three
decades; others, like the Gamelan Council, address larger regions. They have proven very
innovative, pioneering banking techniques like solidarity lending, village banking and mobile
banking that have overcome barriers to serving poor populations. However, with boards that
dont necessarily represent either their capital or their customers, their governance structures
can be fragile, and they can become overly dependent on external donors.
Formal financial institutions
In addition to commercial banks, these include state banks, agricultural development banks,
savings banks, rural banks and non-bank financial institutions. They are regulated and

supervised, offer a wider range of financial services, and control a branch network that can
extend across the country and internationally. However, they have proved reluctant to adopt
social missions, and due to their high costs of operation, often can't deliver services to poor or
remote populations. The increasing use of alternative data in credit scoring, such astrade
credit is increasing commercial banks' interest in microfinance.[25]
With appropriate regulation and supervision, each of these institutional types
can bring leverage to solving the microfinance problem. For example, efforts
are being made to link self-help groups to commercial banks, to network
member-owned organizations together to achieve economies of scale and
scope, and to support efforts by commercial banks to 'down-scale' by
integrating mobile banking and e-payment technologies into their extensive
branch networks.

[edit]Microcredit

and the web

Due to slow progress in developing quality savings services for poor

people, peer-to-peer platforms have developed to expand microlending through
individual lenders in the developed world. The volume channeled through Kiva's
peer-to-peer platform is about $100 million as of November 2009 (Kiva
facilitates approximately $5M in loans each month). In comparison, the needs
for microcredit are estimated about 250 bn USD as of end 2006. [26]. Rang De is
another organization that gives microcredit loans and was started in India in
2008. Still in its nascent stage, Rang de has made social investments of more
than $600,000.[citation needed]
Most experts agree that these funds must be sourced locally in countries that
are originating microcredit, to reduce transaction costs and exchange rate risks.
There have been problems with disclosure on peer-to-peer sites, with some
reporting interest rates of borrowers using the flat rate methodology instead of
the familiar banking Annual Percentage Rate.[27] The use of flat rates, which has
been outlawed among regulated financial institutions in developed countries,
can confuse individual lenders into believing their borrower is paying a lower
interest rate than, in fact, they are.[citation needed]

[edit]Evidence

for reducing poverty

Some proponents of microfinance have asserted, without offering credible

evidence, that microfinance has the power to single-handedly defeat poverty.

[citation needed]
[28]

This assertion has been the source of considerable criticism.

Research on the actual effectiveness of microfinance as a tool for economic

development remains slim, in part owing to the difficulty in monitoring and

measuring this impact.[29] At the 2008Innovations for Poverty Action/Financial
Access Initiative Microfinance Research conference, economist Jonathan
Morduch of New York University noted there are only one or two
methodologically sound studies of microfinance's impact. [30]
The BBC Business Weekly program reported that much of the supposed
benefits associated with microfinance, are perhaps not as compelling as once
thought. In a radio interview with Professor Dean Karlan of Yale University, a
point was raised concerning a comparison between two groups: one African,
financed through microcredit and one control group in the Philippines. The
results of this study suggest that many of the benefits from microcredit are in
fact loaned to people with existing business, and not to those seeking to
establish new businesses. Many of those receiving microcredit also used the
loans to supplement the family income. The income that went up in business
was true only for men, and not for women. This is striking because one of the
supposed major beneficiaries of microfinance is supposed to be targeted at
women. Professor Karlan's conclusion was that whilst microcredit is not
necessarily bad and can generate some positive benefits, despite some lenders
charging interest rates between 40-60%, it isn't the panacea that it is purported
to be. He advocates rather than focusing strictly on microcredit, also giving
citizens in poor countries access to rudimentary and cheap savings accounts. [31]
To further the point stated by Prof Karlan, microfinancing begets the general
tendency of a small business initially supported on credit to gain profits with
time and generate micro savings. In his latest study, the famous two time
pulitzer prize winner, Nicholas Donabet Kristof states that there is no evidence
of any negative influence of micro financing but countless examples of people
now looking at the bigger picture and saving for better things have surfaced.
The example of BancoSol(Bolivia), where the number of savers has grown to
twice as much as the number of borrowers, further strengthens his theory.[32][33]
Sociologist Jon Westover found that much of the evidence on the effectiveness
of microfinance for alleviating poverty is based in anecdotal reports or case
studies. He initially found over 100 articles on the subject, but included only the
6 which used enough quantitative data to be representative, and none of which

employed rigorous methods such as randomized control trials similar to those

reported by Innovations for Poverty Action and the M.I.T. Jameel Poverty Action
Lab. One of these studies found that microfinance reduced poverty. Two others
were unable to conclude that microfinance reduced poverty, although they
attributed some positive effects to the program. Other studies concluded
similarly, with surveys finding that a majority of participants feel better about
finances with some feeling worse.[34]

[edit]Microfinance

and Social Interventions

There are currently a few social interventions that have been combined with
micro financing to increase awareness of HIV/AIDS. Such interventions like the
"Intervention with Microfinance for AIDS and Gender Equity" (IMAGE) which
incorporates microfinancing with "The Sisters-for-Life" program a participatory
program that educates on different gender roles, gender-based violence, and
HIV/AIDS infections to strengthen the communication skills and leadership of
women [35] "The Sisters-for-Life" program has two phases where phase one
consists of ten one-hour training programs with a facilitator with phase two
consisting of identifying a leader amongst the group, train them further, and
allow them to implement an Action Plan to their respective centres.
Microfinance has also been combined with business education and with other
packages of health interventions.[36] A project undertaken in Peru by Innovations
for Poverty Action found that those borrowers randomly selected to receive
financial training as part of their borrowing group meetings had higher profits,
although there was not a reduction in "the proportion who reported having
problems in their business".[37]

[edit]Other

criticisms

There has also been much criticism of the high interest rates charged to
borrowers. The real average portfolio yield cited by the a sample of 704
microfinance institutions that voluntarily submitted reports to the MicroBanking
Bulletin in 2006 was 22.3% annually. However, annual rates charged to clients
are higher, as they also include local inflation and the bad debt expenses of the
microfinance institution.[38]Muhammad Yunus has recently made much of this
point, and in his latest book[39] argues that microfinance institutions that charge
more than 15% above their long-term operating costs should face penalties.

The role of donors has also been questioned. The Consultative Group to Assist
the Poor (CGAP) recently commented that "a large proportion of the money
they spend is not effective, either because it gets hung up in unsuccessful and
often complicated funding mechanisms (for example, a government apex
facility), or it goes to partners that are not held accountable for performance. In
some cases, poorly conceived programs have retarded the development of
inclusive financial systems by distorting markets and displacing domestic
commercial initiatives with cheap or free money." [40]
There has also been criticism of microlenders for not taking more responsibility
for the working conditions of poor households, particularly when borrowers
become quasi-wage labourers, selling crafts or agricultural produce through an
organization controlled by the MFI. The desire of MFIs to help their borrower
diversify and increase their incomes has sparked this type of relationship in
several countries, most notablyBangladesh, where hundreds of thousands of
borrowers effectively work as wage labourers for the marketing subsidiaries
of Grameen Bank orBRAC. Critics maintain that there are few if any rules or
standards in these cases governing working hours, holidays, working
conditions, safety or child labour, and few inspection regimes to correct abuses.
[41]

Some of these concerns have been taken up by unions and socially

responsible investment advocates.

For example, BusinessWeek reported that some Mexicans are stumbling with
terms of newly available funding.[42][43]
Other criticism was raised by the IPO (Initial Public Offering) of a Mexican
MFI Banco Compartamos in 2007. As the company put its shares on Mexican
Stock Exchange it was able to generate very high profits that were achieved by
rising interest rates on their micro-loans that at some point reached 86% per
year.[44] In July 2010 India's biggest MFI, SKS Microfinance also went public. In
both instances Muhammad Yunus publicly stated his disagreement, saying that
the poor should be the only beneficiaries of microfinance. [45][46]

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Impact and Future Prospects. The World Bank, 2005.

Wright, Graham A.N. Microfinance Systems: Designing Quality Financial

Services for the Poor. The University Press, Dhaka, 2000.

United Nations Department of Economic Affairs and United Nations Capital

Development Fund. Building Inclusive Financial Sectors for Development.
United Nations, New York, 2006.

Yunus, Muhammad. Creating a World Without Poverty: Social Business

and the Future of Capitalism. PublicAffairs, New York, 2008.

[edit]See

also

Sustainable development portal

Bank

Credit union

INAFI

Microcredit

Microinsurance

One Hen

Opportunity finance

Microfinance in Tanzania

Microfinance in China

Microfinance organizations

Pawnbroker

ROSCA

Savings bank

Alternative data

Prosper.com

Crowdfunding

[edit]Notes
1.

^ Robert Peck Christen, Richard Rosenberg & Veena Jayadeva.Financial

institutions with a double-bottom line: implications for the future of
microfinance. CGAP Occasional Paper, July 2004, pp. 2-3.

2.

^ Hernando de Soto. The Other Path: The Invisible Revolution in the Third
World. Harper & Row Publishers, New York, 1989, p. 162.

3.

^ a b Adams, Dale W., Douglas H. Graham & J. D. Von Pischke

(eds.). Undermining Rural Development with Cheap Credit.Westview
Press, Boulder & London, 1984.

4.

^ Marguerite Robinson. The Microfinance Revolution: Sustainable

Finance for the Poor World Bank, Washington, 2001, pp. 199-215.

5.

^ a b Helms, Brigit (2006). Access for All: Building Inclusive Financial

Systems. Washington, D.C.: The World Bank.ISBN 0821363603.

6.

^ a b Microfinance: An emerging investment opportunity. Deutsche Bank

Dec 2007

7.

^http://www.citigroup.com/citigroup/microfinance/data/news080303b.pdf

8.

^ Helms (2006), p. xi

9.

^ a b c Helms (2006), p. xii

10. ^ Robert Peck Christen. What microenterprise credit programs can learn
the moneylenders, Accion International, 1989
11. ^ See for example Adrian Gonzalez & Richard Rosenberg. The state of
microfinance: outreach, profitability and poverty, Consultative Group to
Assist the Poor, 2006.
12. ^ Microfinance Information Exchange, Inc. (2007-08-01)."MicroBanking
Bulletin Issue #15, Autumn, 2007, pp. 46,49". Microfinance Information
Exchange, Inc.. Retrieved 2010-01-15.
13. ^ McKenzie, David (2008-10-17). "Comments Made at IPA/FAI
Microfinance Conference Oct. 17 2008". Philanthropy Action. Retrieved
2008-10-17.
14. ^ See for example Cheryl Frankiewicz Calmeadow Metrofund: a Canadian
experiment in sustainable microfinance, Calmeadow Foundation, 2001.
15. ^ Stuart Rutherford. The Poor and Their Money. Oxford University Press,
New Delhi, 2000, p. 4. isbn =019565790X
16. ^ Khandker, Shahidur R. Fighting Poverty with Microcredit, Bangladesh
edition, The University Press Ltd, Dhaka, 1999, p. 78.
17. ^ Graham A.N. Wright and Leonard Mutesasira. The relative risks to the
savings of poor people, Micro-Save Africa, January, 2001.
18. ^ Robert Peck Christen, Richard Rosenberg & Veena Jayadeva.Financial
institutions with a double-bottom line: implications for the future of
microfinance. CGAP Occasional Paper, July 2004.
19. ^ MFW4A - Microfinance (2010-11-05). "MFW4A - Microfinance".

20. ^ Christen, Rosenberg & Jayadeva. Financial institutions with a doublebottom line, pp. 5-6
21. ^ Microfinance Information Exchange, Inc. (2009-12-01)."MicroBanking
Bulletin Issue #19, December, 2009, pp. 49". Microfinance Information
Exchange, Inc..
22. ^ See for example Joachim de Weerdt, Stefan Dercon, Tessa Bold and
Alula Pankhurst, Membership-based indigenous insurance associations in
Ethiopia and Tanzania For other cases seeROSCA.
23. ^ Brigit Helms. Access for All: Building Inclusive Financial
Systems. CGAP/World Bank, Washington, 2006, pp. 35-57.
24. ^ State of the Microcredit Summit Campaign Report 2007, Microcredit
Summit Campaign, Washington, 2007.
25. ^ Turner, Michael, Robin Varghese, et al. Information Sharing and SMME
Financing in South Africa, Political and Economic Research
Council (PERC), p58.
26. ^ Deutsche Bank research, Microfinance: An emerging investment
opportunity, December
0207,http://www.dbresearch.com/PROD/DBR_INTERNET_ENPROD/PROD0000000000219174.pdf
27. ^ See the recent technical paper "Why we need transparent pricing in
microfinance" on the problems with flat rate disclosure
28. ^ Dichter, T.. "Hype and Hope: The Worrisome State of the Microcredit
Movement". Consultative Group to Assist the Poor (CGAP).
29. ^ Littlefield, Elizabeth; Morduch, Jonathan and Hashemi, Syed (2003-0101). "Is Microfinance an Effective Strategy to Reach the Millennium
Development Goals?" (PDF). FocusNote(Consultative Group to Assist the
Poor) (24). Archived from the original on 2007-02-03. Retrieved 2007-0327.
30. ^ Morduch, Jonathan (2008-10-17). "Comments Made at IPA/FAI
Microfinance Conference Oct. 17 2008". Philanthropy Action. Retrieved
2008-10-17.
31. ^ BBC.co.uk
32. ^ Kristof, Nicholas (2009-12-28). "The Role of Microfinance". The New
York Times.
33. ^ [1]

34. ^ Westover J. (2008). The Record of Microfinance: The

Effectiveness/Ineffectiveness of Microfinance Programs as a Means of
Alleviating Poverty. Electronic Journal of Sociology.
35. ^ Kim, J.C., Watts, C. H., Hargreaves, J. R., Ndhlovu, L. X., Phetla, G.,
Morison, L. A., et al. (2007). Understanding the impact of a microfinancebased intervention of women's empowerment and the reduction of intimate
partner violence in South Africa. American Journal of Public Health.
36. ^ Stephen C. Smith, "Village Banking and Maternal and Child Health:
Evidence from Ecuador and Honduras," World Development, 30, 4, 707
723, April 2002
37. ^ Karlan D, Valdivia M. (2009). Teaching Entrepreneurship: Impact of
Business Training on Microfinance Clients and Institutions. Forthcoming
March 2010, Review of Economics and Statistics.
38. ^ Microfinance Information Exchange, Inc. (2007-08-01)."MicroBanking
Bulletin Issue #15, Autumn, 2007, pp. 48". Microfinance Information
Exchange, Inc..
39. ^ Muhammad Yunus and Karl Weber. Creating a World Without Poverty:
Social Business and the Future of Capitalism. PublicAffairs, New York,
2007
40. ^ Brigit Helms. Access for All: Building Inclusive Financial
Systems. CGAP/World Bank, Washington, 2006, p. 97.
41. ^ Farooque Chowdhury. The metamorphosis of the micro-credit
debtor New Age, June 24, 2007.
42. ^ Businessweek, The Ugly Side of Microlending
43. ^ Mexican microlending bank surges in market debut
44. ^ CGAP, "Banco Compartamos: Interest Rates, Profits, and an Initial
Public Offering"http://www.cgap.org/p/site/c/template.rc/1.26.4905/
45. ^ Businessweek, "Online Extra: Yunus Blasts
Compartamos"http://www.businessweek.com/magazine/content/07_52/b4
064045920958.htm
46. ^ ABCNews, SKS Launches India's First Microfinance
IPOhttp://abcnews.go.com/Business/wireStory?id=11270209

[edit]External

links

Microfinance at the Open Directory Project

Categories: Development | Microfinance | Poverty | Social economy

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