Suggestions for Designing a Microcredit Model
This paper presents suggestions for designing a new microcredit model in the context of recent crises in the microfinance industry. It recommends using the Basel III core principles as a framework for designing the new model.The paper states that microfinance crises are often the result of difficulties in balancing social and commercial objectives in a risky market. It discusses the classification of financial institutions in Base III principles and examines how social performance indicators can be included in assessment of different categories of MFIs.The paper concludes by pointing out the advantages of the new microcredit model based on classification of MFIs. These include:
- Increased transparency in the microfinance industry;
- Homogenization of a heterogeneous group of financial and non-financial service providers;
- Niches for every type of financial institution and availability of financial services for every segment of population.