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 ,

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. ,

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 ,

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. ,

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 ,

Who migrates overseas and is it worth their while ? an assessment of household survey data from Bangladesh

The paper assesses the costs and household level benefits of migrating overseas from Bangladesh. The authors survey households who have had overseas migrants to assess their characteristics compared to non-migrants. They also compute various types of migration and remittance related transaction costs and discuss the channels by which overseas migration is financed, remittances sent and the constraints faced by the poorest. Using the Propensity Score Matching method, the paper finds that overseas migration conveys substantial benefits to families as measured by household consumption, use of modern agricultural inputs, and level of household savings. The authors also offer some possible policy directions to strengthen the returns from migration as well as reduce some of the costs.Population Policies,Access to Finance,Remittances,Banks&Banking Reform,Debt Markets

Placement and outreach of group-based credit organizations

Bangladesh has witnessed major strides in providing financial services to the rural poor. These services are provided largely through innovative group-based credit programs of several nongovernmental organizations. The implicit but widespread assumption has been that they are indeed placed in special poverty-stricken areas. Is this assumption valid? If not, what factors actually affect programs' placement across communities? This paper uses an unique thana-level data set to analyze the placement of three group-based credit programs in Bangladesh. Analysis of branch placement indicates that, unlike commercial banks, nongovernmental institutions do respond to general conditions of poverty. However, it appears that NGO services are located more in poor pockets of relatively well-developed areas than in remoter, less-developed regions. Client density of the established branches, however, did not exhibit such a feature and actually tended to be better in less advantageous locations.Credit. ,Financial institutions. ,Rural poor. ,

Factors affecting repayment rates in group-based lending

Lending is a risky enterprise because repayment of loans can seldom be fully guaranteed. The failure of a large number of state-sponsored agricultural development banks in many developing countries was due, among other things, to their inability to ensure good repayment rates among their borrowers. In the context of providing credit to the rural asset-poor, what is being increasingly called for is institutional innovation that combines prudent banking principles with effective screening and monitoring strategies that are not based on physical collateral (such as land). One important innovation has been the formation of borrower groups and the use of group responsibility and peer monitoring as the core principles guiding financial transactions. The authors cite successful endeavors including Grameen Bank in Bangladesh, SANSA in Sri Lanka and Credit Solidaire in Burkina Faso and, in Thailand, the Bank for Agriculture and Agricultural Cooperatives, and examine the factors affecting repayment rates.Banks and banking Africa. ,Agricultural credit. ,Rural credit Developing countries. ,Grameen Bank. ,Cooperative societies. ,Financial institutions Management. ,Burkina Faso. ,Thailand. ,Sri Lanka. ,Bangladesh ,

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. ,

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. ,