MFIs should offer more than just microfinance, study finds

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Financial Inclusion

MFIs should offer more than just microfinance, study finds

CIMMYT (flickr). "/>
Mobile phones are one of the ways ADB says will increase microfinance availability among the poor. Photo: CIMMYT (flickr).

Despite the surging popularity of microfinance in the last several decades, access among the poor in Asia and the Pacific remains low. A new report says technology and livelihood programs will put it in the hands of more people.

The report was conducted by the Independent Evaluation at the Asian Development Bank (ADB), one of the largest providers of microfinance in the region. From 2000 to 2010, ADB approved roughly $2.8 billion for microfinance support through "88 loans, grants, technical assistance operations, and private sector investments."

During that time ADB dedicated most of its efforts towards supporting "the creation of an enabling policy environment for microfinance in recipient countries." With the cooperation of various governments and institutions, ADB was successful in easing regulatory and policy constraints that hindered developing microfinance in the region.

Yet, by the end of 2010, only about 20 percent of the population living on less than $1.25 per day had direct access to microfinance services in 21 developing countries receiving support from ABD.

In looking for ways to increase microfinance availability among the poor, the study released October 17 found that:

Combining access to financial services with livelihood programs, food aid, as well as technology-based solutions like mobile phones, internet banking and payment cards can "help microfinance institutions reduce operating costs and expand the reach of their services."

Whatever the particular approach, principal author of the evaluation, and ADB financial specialist, Binh Nguyen, noted that "far more attention must be given to the financial literacy of the poor, consumer protection, and accountability to customers to ensure sound microfinance practices and that the poor have access to safe financial services.”

RESOURCE:Microfinance Development Strategy 2000: Sector Performance and Client Welfare (pdf)

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