Principles of Sustainable Microfinance

This paper presents microfinance good practice principles supported by World Education Australia. MFIs employ a wide variety of methods to reach low-income communities with appropriate and affordable services. While there are no specific methods that are appropriate in all contexts, certain principles are recognized as good practices when delivering microfinance services. They are:

• Microfinance services must fit needs and preferences of clients;
• Poor households need access to a wide variety of financial services, not just loans;
• Microfinance is a powerful instrument against poverty;
• Microfinance means building financial systems that serve the poor;
• Financial sustainability is necessary to reach significant number of poor people;
• Interest rate ceilings can damage poor people's access to financial services;
• Credit is not always appropriate;
• Role of governments is as an enabler, and not a direct provider of financial services;
• Donor subsidies should complement, not compete with private sector capital;
• Lack of institutional and human capacity is the key constraint to the expansion of microfinance;
• Financial and outreach transparency are important to mitigate concerns over unfair pricing of products, and promote sustainability of the microfinance industry.