Impact of microfinance on poverty alleviation

The spectacular growth of the microfinance industry has been fueled not by market forces but by conscious actions of national governments, nongovernmental organizations (NGOs), and donors who view microfinance as an effective tool for alleviating poverty. Since much of the impetus behind this large and increasing support for microfinance hinges on the assumption that its economic and social impacts are significant, it needs to be examined more closely. This review... indicates that impact studies themselves must be improved to make more accurate assessments of benefits. This is important, for only through cycles of innovation, experimentation, and evaluation can we hope to establish lasting institutions that alleviate the financial constraints faced by the poor.Microfinance Evaluation. ,Microenterprises Finance. ,Non-governmental organizations. ,Government spending policy. ,Poverty alleviation. ,Evaluation. ,Financial institutions. ,

Microfinance

These 14 policy briefs summarize lessons learned from IFPRI´s multicountry program on rural finance and household food security with regard to the poors' demand for financial services. The lessons are derived from detailed household surveys conducted in nine countries of Asia and Africa: Bangladesh, Cameroon, China, Egypt, Ghana, Madagascar, Malawi, Nepal, and Pakistan. The 14 summaries cover the results of research undertaken between 1994—2000.Finance Developing countries. ,Rural poor. ,Food security Asia ,Food security Africa ,

The scope for policy reforms in rural microfinance

This brief considers the scope for policy action in seven areas: (1) regulation of microfinance institutions, (2) provision of saving services, (3) product innovation, (4) organizational issues in microfinance, (5) poverty impact of microfinance, (6) agricultural finance, and (7) subsidy and sustainability issues.Microfinance Evaluation. ,Agriculture Finance. ,Subsidies. ,Sustainability. ,Poverty alleviation. ,Financial institutions Management. ,Financial institutions Regulation. ,New products Finance. ,Savings and investment Developing countries. ,

The demand for financial services by the rural poor

This policy brief summarizes lessons learned from IFPRI's multicountry program on rural finance and household food security with regard to the poors' demand for financial services. The lessons are derived from detailed household surveys conducted in nine countries of Asia and Africa: Bangladesh, Cameroon, China, Egypt, Ghana, Madagascar, Malawi, Nepal, and Pakistan.Rural credit Developing countries. ,Finance Developing countries. ,Food security Household. ,Poor Developing countries. ,Household surveys Egypt. ,Household surveys Ghana. ,Household surveys Malawi. ,Household surveys Bangladesh. ,Household surveys China. ,Household surveys Cameroon. ,Household surveys Madagascar. ,Household surveys Nepal. ,Household surveys Pakistan. ,FCND ,

If only I could borrow more ! Production and consumption credit constraints in the Philippines

This paper provides a new approach to analyzing credit constraints by differentiating which of the household's production and consumption decisions are affected by credit constraints. It also provides a first attempt to estimate of the extent and determinants of credit constraints in the Philippines. Based on direct questions on households' experiences in credit markets, we estimate the percentage of credit-constrained households at 65%. The lack of credit constrained the level of agricultural production of 37% of the farming households ; it also constrained the level of family business production of 31% of the households operating such businesses. Credit constraints also limited consumption choices of 21% of the sample households. We found that the presence of credit programs operating in the village and proximity to commercial banks and rural banks reduced the probability of credit constraints in production decisions. Further, some types of households are more likely to experience credit constraints. These are the households with little education, households that own little or no titled land and sugar-producing households.Credit constraints, Philippines, Asia.

Considerations in the placement and outreach of microfinance organizations

Governments, policymakers, and donors attach a great deal of importance to poverty outreach—the extent to which MFIs serve poor and disadvantaged locations—when evaluating microfinance institutions (MFIs). With the above considerations in mind, IFPRI undertook a study of the service placement of three major NGOs in Bangladesh: the Association of Social Advancement (ASA), the Bangladesh Rural Advancement Committee (BRAC), and Proshika Manobik Unnayan Kendra (PROSHIKA).Evaluation. ,Non-governmental organizations Bangladesh. ,Finance Developing countries. ,Poor Bangladesh. Microenterprises Bangladesh Finance. ,

Rural financial services for poverty alleviation

For poor rural families in developing countries, access to credit and savings facilities has the potential to make the difference between grinding poverty and an economically secure life. Well-managed savings facilities permit households to build up funds for future investment or consumption. Credit enables them to tap finances beyond their own resources and to take advantage of profitable investment opportunities. Credit and savings also serve as insurance for the poor. In rural areas of developing countries, short-term loans or past savings are often used to provide basic necessities when household incomes decline temporarily — after a bad harvest or between agricultural seasons, for example....Successful financial outreach to the rural poor requires institutional innovations that reduce the risks and costs of lending small amounts of money. So far, most innova-tions in microfinance have come from nongovernmental organizations (NGOs) that do not have commercial profit as their principal objective. By taking fresh approaches, these new microfinance institutions have penetrated rural financial markets and serviced an underclass of borrowers in a way that was unimaginable some 20 years ago....One important lesson that is becoming increasingly clear: there is no single institutional blueprint for success.Rural credit Developing countries. ,Rural poor. ,Savings and investment Developing countries. ,Households Economic aspects. ,Financial institutions. ,Non-governmental organizations. ,Microfinance Evaluation. ,Banks and banking. ,FCND ,

Community-driven development and scaling-up of microfinance services

"This case study examines the scaling-up experiences of two microfinance institutions: the Nirdhan Utthan Bank Limited (NUBL) in Nepal and the Self-Help Group (SHG)-Bank linkage program of the National Agricultural Bank for Agriculture and Rural Development (NABARD) in India. Both NUBL and NABARD groups use self-regulation (peer selection, peer monitoring, and peer enforcement of contracts) as key to gaining access to services not otherwise available to them.... The NABARD experience is government-led. NUBL, on the other hand, was established as an alternative to government action. In both cases, government policy in the form of mandatory "priority sector" credit played and continues to play a critical role in facilitating expansion. The subsidy content (explicit and implicit) of both NUBL and the NABARD program is quite high, and continued expansion of both programs is highly conditional on whether the policy regime of directed credit continues. Any change in this policy will deal a severe blow to both of these institutions." from Authors' AbstractMicrofinance ,Community participation ,Scaling up ,

Assessing the relative poverty level in clients of microfinance institutions

Many microfinance institutions (MFIs) receive public support. In return for this support, governments and donors demand MFIs not only become financially sustainable but also reach the poor, or even the poorest of the poor. Effective evaluation of the achievement of these objectives requires appraising both the MFI's financial sustainability and the relative poverty of its clients. In recent years, several tools have emerged to assist donors in their assessment of the financial sustainability of MFIs. For example, the Consultative Group to Assist the Poorest (CGAP), which seeks to promote sustainable microfinance institutions for the poor, disseminates a number of tools that allow assessing the financial sustainability and other aspects of institutional performance of MFIs. Currently, no operational tool exists for measuring how well a MFI reaches the poor through its services. In order to gain more transparency on the depth of poverty outreach, CGAP supported research at IFPRI during 1999 and 2000 to design and test a simple, low-cost operational tool to measure the poverty level of MFI clients relative to nonclients. This policy brief summarizes the main features of the tool, how it can be applied, and what type of results can be obtained.Microfinance Evaluation. ,Poverty Research Evaluation. ,Poverty Research Methodology. ,Financial institutions. ,Sustainability. ,Microenterprises Finance. ,

Strengthening public safety nets

Helping to reduce vulnerability poses a new set of challenges for public policy. The most immediate challenge is to determine the appropriate role for public action if there should be a role at all. A starting point is the ways that communities and extended families try to cope with difficullties in the absence of government interventions. Coping mechanisms range from the informal exchange of transfers and loans within families and commmunitieis to more structured institutions that enable an entire community to provides protections to their neediest members. The existence of this web of private and nonformal mechanisms pompts a series of questions: Will building public safety nets displace existing mechanisms and offer limited net gain to households? Would it be more effective to strengthen existing mechanisms than creating new ones? Can the private sector and NGOs play larger roles? This paper provides some speculative answers and describes places for public action, as well as its limits.Social institutions. ,Public institutions. ,