Young and Promising Microfinance Institutions

How can "breakthrough institutions" become stable?
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This paper summarizes the proceedings of the Global Microfinance Meeting on Young and Promising MFIs, held at the United Nations, to probe into the issue of making young and promising microfinance breakthrough institutions stable in the long run.

The purpose of the meeting was to improve the understanding of donors, technical service providers and practitioners working with young institutions on issues crucial to the support of institutional development and growth of young MFIs.The paper states that the meeting discussed four crucial areas:

  • Identifying breakthroughs;
  • Fostering successful technical assistance relationships;
  • Financing growth through liabilities;
  • Financing growth through equity investments.

The paper highlights the conclusions of the meeting:

  • To be stable in the long run, MFIs need to transform themselves into cooperative-type institutions. This would help them mobilize additional sources of capital, in particular share-holder equity, which would provide a longer-term, more stable source of capital than donor money;
  • To attract equity, a MFI should exceed the requirements that technical service providers (TSPs) look for in choosing a promising MFI;
  • The legal environment of a country may restrict or facilitate transformation;
  • There is no single best way for a MFI to transform and to raise the necessary capital to serve its growing market in the long run.

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