Sustainable Microfinance: The Balance Between Financial Sustainability and Social Responsibility

Using microfinance as a tool to alleviate poverty
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This study explores ways to create a sustainability model of microfinance by integrating remittance flows and cross-border microenterprise activities into microfinance business.

According to CGAP, remittances can be considered as an alternative source of income for MFIs. The volume of remittances sent to developing and under-developed countries has been increasing yearly. However, remittance recipients have not utilized these funds for productive purposes as they lack access to financial services. Governments, donors, and finance institutions in different countries have been trying to channel remittances towards productive uses by:

  • Connecting remittance transfers to financial services for recipients to gain access to savings and investments programs;
  • Encouraging MFIs and credit unions to serve as receiving institutions for remittance inflows in order to reach poorer recipients;
  • Using remittances to support micro, small, and medium sized enterprise development.

Finally, the paper suggests that MFIs from host and home countries can connect with each other and make use of remittance inflows to support local microenterprises from both countries to expand their business and cooperate with each other.