Commercial Microfinance: The Right Choice for Everyone?

Paper
Date Published: 
Jan 2004
Author: 
Clark, H.

The commercial approach to microfinance has gained momentum

This paper is a study of commercial microfinance in the Asian region where:

  • Microfinance services are provided by commercial organizations that are part of the formal financial system:
    • Banks;
    • Credit unions;
    • Specialized banks;
    • A range of nonblank financial institutions.
  • The organizations are financed by commercial capital.

The report analyzes the pre- and post-transformation performance of microfinance institutions (MFIs) in the region and presents the following:

  • Most of micro credit NGOs have not left their original market behind;
  • The initial innovators of a commercial approach to microfinance are some of the best performing MFIs in the world today;
  • The three groups of market players are the adopters, the fence sitters and the rejecters:
    • The Rejecters can contribute to a body of knowledge by regular reporting on meaningful performance indicators in:
      • Tackling poverty;
      • Building inclusive financial markets.
    • The Fence-Sitters can play a critical role in working with support organizations to:
      • Develop capacity;
      • Engage banking authorities.
    • The Early Adopters continue to innovate with technology and will seek ways to:
      • Expand institutional capacity;
      • Attract private commercial capital.

The paper concludes that as important players in the marketplace, each group has a role to play in bridging the gap between supply and demand for microfinance.

Type: 
Paper