Sharing Information on Microfinance

Scaling-up microfinance and complementing it with remittances
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This newsletter of Asian Development Bank (ADB) consists of two articles:

  • Building Financial Services for the Poor;
  • Workers' Remittances and Microfinance: The Neglected Nexus.

The first article argues that financial services for the poor have proven to be commercially viable. High repayment and cost recovering interest rates permit well-managed microfinance institutions (MFIs) to achieve long-term sustainability. However, penetration of microfinance is still an impending issue. The article highlights a multi-pronged approach to achieve scalability for delivering financial services to the poor:

  • Existing financial institutions can be encouraged to adopt transparent pricing/practices;
  • Existing non-financial infrastructure in villages and towns may serve as a delivery vehicle.

The article concludes that deploying delivery channels will require creative experimentation with different models, mechanisms, products and services.

The second article details that MFIs in several regions have entered the business of money transfers, mobilizing savings and providing microcredit based on remittances. It highlights a win-win proposition for MFIs and their clients:

  • MFIs can use remittances to leverage more funds in the commercial markets;
  • Income from remittances business can help MFIs reduce vulnerability;
  • The families receiving remittances may find that MFIs' involvement will provide better ways to manage their inflows;
  • Efficiency gains to MFIs can be shared with their clients.

As a conclusion, the article mentions that improvements in both the supply and the demand sides can make a significant contribution to increase the welfare of the poor and low-income households.

About this Publication

By Heeswijk, Jan P.M.V