Developing Community Finance: Some Lessons Learned

This paper describes some of the recent lessons learned by Développement International Desjardins (DID) in light of the intense development that the community finance sector has experienced. The paper describes the background of the lessons learned, stating that:

• The vogue for microcredit refocused attention on the importance of financial leverage for community development;
• The Microcredit Summit highlighted the need to make credit available to the poorest in order to reduce poverty;
• The Consultative Group to Assist the Poor (CGAP) promoted the need to make microcredit profitable;
• Today, the international community's belief is that these two goals are inseparable.

The paper then outlines the lessons that DID learned:

• Savings are important to support the development of local community finance institutions;
• Under certain conditions, financial cooperatives may become formidable distribution networks for dispensing financial resources;
• There is a need to strengthen community finance institutions and their legal and regulatory environments;
• The performance of a community finance organization should be monitored using the three dimensions of business, organizational and institutional performance;
• There is a need to expand partnerships.

The paper concludes that:

• Too many individuals are still excluded from formal financial systems;
• Community finance needs to be treated as a sector requiring a global approach to take advantage of all the potential for assisting populations and communities;
• With help from partners in the developing world, community finance will perhaps receive that treatment in the coming years.