Paper

A Review of the Economic and Social Impact of Microfinance: With Analysis of Options for the Mediterranean Region

Reviewing beneficial impact of microfinance on households and microenterprises
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This study examines microfinance’s economic and social impact in the Mediterranean region.

Microcredit is the predominant microfinance offering in the Mediterranean region. The study reveals that:

  • Clients do not have access to microsavings, insurance and money transfer systems;
  • MFIs are constrained by banking sector regulations;
  • Microfinance has resulted in improvements in household income and enterprise profits and revenue;
  • Impact on employment is weak, with most microenterprises remaining one-man businesses;
  • Microfinance has helped enterprises increase productivity, and improve relationships with suppliers;
  • Credit is typically used for working capital, and lending for capital formation is less common;
  • Impact on household savings is difficult to identify as boundaries between the household and the enterprise are often indistinct;
  • Microfinance clients are positive about microfinance impact on living conditions.

Microfinance in the region would benefit by the expansion of microsavings, provision of money-transfer and microinsurance, and regulatory reform that would allow MFIs to accept deposits and provide other non-credit services.