The Role of Commercial Banks in Microfinance
prepared by Ruth Goodwin-Groen
Examines the potential role of commercial banks in microfinance, with particular reference to the Asia-Pacific region. Based on interviews with bankers and microfinance practitioners.
- Microenterpreneurs in Asia-Pacific developing countries have little access to the formal financial system. At best, formal institutions such as commercial banks reach only the top 25% of populations. Some 200 million households of the self-employed poor in the Asia-Pacific region are denied access to microfinance.
Specialized microfinance institutions have grown up to meet this demand, but their outreach is still small relative to the demand, Commercial banks do some micro-lending, but mainly because they are forced to do so by governments. Few banks see it as a market opportunity.
Yet the evidence indicates that commercial bank microlending can be profitable. Based on interviews with bankers in the Asia-Pacific region, this report considers the experience of commercial bank engagement in microfinance and the factors which appear to underlie success. It also deals with the role of government in providing a supportive environment, and how donor agencies can encourage greater commercialization of microfinance.
The Role of Commercial Banks in Microfinance: Asia-Pacific Region. A report of the Foundation for Development Cooperation, xiv + 84 pp. Price: (P&H included): Australia $25.00; overseas excluding Europe $28.00; Europe £15.00. Please add $7.00 for cheques to cover collection charges.
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