Core Principles of the Coalition

All members of the Coalition for Microfinance Standards subscribe to the following beliefs and/or principles:

1. The poor need access to appropriate financial services.
2. The poor can repay loans, can pay the real cost of loans, and can save.
3. Microfinance is one effective tool for the alleviation of poverty.
4. Microfinance institutions must aim to provide financial services to great numbers of poor people.
5. Microfinance can and should be undertaken on a viable and sustainable basis.
6. Microfinance NGOs and programs must develop performance standards that will help define and govern the microfinance industry toward greater reach and sustainability.

A brief explanation of these principles is shown below:

1. The poor need access to appropriate financial services.

   A great majority of the poor have no access to savings and credit services. The demand for microfinancial services has not been met by formal and semi-formal financial institutions. There is a strong demand among the poor for credit and savings services which are appropriate to their needs. Poor people deserve high quality financial services - fast, friendly and fair.

2. The poor can repay loans, can pay the real cost of loans, and can save.

   We believe that the poor who are engaged in micro and small enterprises have the ability to utilize and manage funds allowing them to increase their incomes. They have the ability and willingness to repay the loans. They can pay the real costs of such credit. The poor can save. They need savings instruments that are accessible and appropriate to their needs.

3. Microfinance is one effective tool for the alleviation of poverty.

   Microfinance which is the means of providing a range of financial services to the poor based on market-driven and commercial approaches, is now increasingly recognized locally and abroad as an effective tool for poverty alleviation. Microfinance allows the poor to increase their economic productivity and increase their income.

4. Microfinance institutions must aim to provide financial services to great numbers of poor people.

   We believe that reaching out to great numbers of people with a range of market-sensitive financial services is necessary to contribute significantly to poverty alleviation.

5. Microfinance can and should be undertaken on a viable and sustainable basis.

   Microfinance services should be made available on a continuing basis. Local and international experience have demonstrated that microfinance can be undertaken on a viable and sustainable basis. We believe that microfinance should aim for full cost recovery after a reasonable development period.

6. Microfinance NGOs and programs must develop performance standards that will help define and govern the microfinance industry towards greater outreach and sustainability.

   These are organizational, operating, financial and reporting standards that will lead to the recognition of microfinance as a legitimate sector in the financial services industry. The establishment of standards will also allow the measurement of institutional efficiency and effectiveness, the comparison of players, the display of accountability, and will encourage MFIs to continuously move to a higher level of performance. The standards will also raise the investment attractiveness of MFIs.

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