State of the Art of Microfinance: A Narrative
This paper reviews the state of microfinance in the Philippines and other countries based on existing literature. It focuses on microfinance outreach, progress, impact and access. It captures different perspectives on development, challenges and future directions of microfinance.
The paper provides policymakers, regulators, MFIs, donors and other stakeholders with information on microfinance policies and practices. It aims to help them identify potential gaps in microfinance literature, which can be the subject of future research agenda and policy advocacy. Key findings include:
- Microfinance is yet to reach many of the rural poor, although it has played an important role in poverty reduction;
- Appropriate government intervention and donor support are necessary to mainstream microfinance into the financial sector;
- Supportive policy environment has enabled microfinance to flourish in the Philippines;
- Solid policy groundwork for microfinance has been undertaken since 1998 in the Philippines, starting with the issuance of the National Strategy for Microfinance.
Commercialization has not diverted MFIs from their mission in the Philippines. Finally, more systemic approaches should be adopted in the future because they are more sustainable and provide for greater impact and effectiveness in the long-run.