Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Research reveals best paths for success as microfinance sector grows

13.02.2009
As the microfinance sector passes the 150 million customer mark, an intense debate continues over the movement toward greater commercialization of an arena once led by nonprofits.

"Microfinance Meets the Market," just published in the Journal of Economic Perspectives, advances the debate, presenting new research from Jonathan Morduch of the Financial Access Initiative, housed at New York University's Wagner Graduate School of Public Service, and Robert Cull and Asli Demirgüç-Kunt of the World Bank. The research reveals complementary paths to a successful expansion of the microfinance industry.

The full article is available online, here: http://financialaccess.org/sites/default/files/G4_Microfinance_

Meets_Market_0.pdf

"Arguing for a purely nonprofit or commercial approach to global microfinance services misses the point and limits the opportunities to reach a significantly broader population," commented Professor Morduch. "We shouldn't be choosing sides. By embracing both NGO and commercial options we can leverage innovation to drive down costs and expand access."

Roughly 40-to-80 percent of the populations in most developing economies lack access to formal banking services. There is general agreement that access to reliable financial services could improve the lives of hundreds of millions, perhaps billions, of low-income people currently without access to banks.

In examining 346 of the world's leading microfinance organizations covering 18 million borrowers, the research presented in "Microfinance Meets the Market" reveals that while commercialization is a powerful trend, commercial banks such as Mexico's Compartamos and avowedly "social businesses" like Grameen Bank are not substitutes for each other. Each has benefits and limitations.

Commercial microfinance banks, as a group, make loans that on average are about four times larger than loans from non-governmental organizations (NGOs). Since poorer customers generally demand smaller loans, average loan size is a rough proxy for the poverty level of customers. Microfinance banks tend to serve a substantially better-off group of borrowers than do NGOs, and banks also serve fewer women as a share of their customers.

While many NGOs do in fact earn profits from their microfinance activities, investors seeking only financial returns would have little interest in most of the institutions serving poorer customers. Commercial investment is necessary to fund the continued expansion of microfinance, but institutions with strong social missions, many taking advantage of subsidies, remain best placed to reach and serve the poorest customers and some are doing so at massive scale. The paper shows that social investors, foundations, and public agencies remain an important part of the microfinance equation.

About the Financial Access Initiative:

The Financial Access Initiative (FAI) is a consortium of leading development economists focused on substantially expanding access to quality financial services for low-income individuals, offering the next generation of thinking about microfinance. FAI is housed at the Wagner Graduate School of Public Service at New York University and led by managing director Jonathan Morduch and directors Dean Karlan (Yale University) and Sendhil Mullainathan (Harvard University). FAI focuses on basic research and measurement tools that reveal the most effective means of implementing microfinance initiatives. FAI studies the value of microfinance by identifying the demand for financial services; the impact of financial access on incomes, businesses, and broader aspects of well-being; and mechanisms that can increase impact and scale of microfinance.

Robert Polner | EurekAlert!
Further information:
http://www.nyu.edu
http://www.financialaccess.org

More articles from Business and Finance:

nachricht How Strong Brands Translate into Money
15.11.2016 | Kühne Logistics University - Wissenschaftliche Hochschule für Logistik und Unternehmensführung

nachricht Demographic change depresses tax revenues
04.11.2016 | Fraunhofer-Institut für Angewandte Informationstechnik FIT

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: How gut bacteria can make us ill

HZI researchers decipher infection mechanisms of Yersinia and immune responses of the host

Yersiniae cause severe intestinal infections. Studies using Yersinia pseudotuberculosis as a model organism aim to elucidate the infection mechanisms of these...

Im Focus: Interfacial Superconductivity: Magnetic and superconducting order revealed simultaneously

Researchers from the University of Hamburg in Germany, in collaboration with colleagues from the University of Aarhus in Denmark, have synthesized a new superconducting material by growing a few layers of an antiferromagnetic transition-metal chalcogenide on a bismuth-based topological insulator, both being non-superconducting materials.

While superconductivity and magnetism are generally believed to be mutually exclusive, surprisingly, in this new material, superconducting correlations...

Im Focus: Studying fundamental particles in materials

Laser-driving of semimetals allows creating novel quasiparticle states within condensed matter systems and switching between different states on ultrafast time scales

Studying properties of fundamental particles in condensed matter systems is a promising approach to quantum field theory. Quasiparticles offer the opportunity...

Im Focus: Designing Architecture with Solar Building Envelopes

Among the general public, solar thermal energy is currently associated with dark blue, rectangular collectors on building roofs. Technologies are needed for aesthetically high quality architecture which offer the architect more room for manoeuvre when it comes to low- and plus-energy buildings. With the “ArKol” project, researchers at Fraunhofer ISE together with partners are currently developing two façade collectors for solar thermal energy generation, which permit a high degree of design flexibility: a strip collector for opaque façade sections and a solar thermal blind for transparent sections. The current state of the two developments will be presented at the BAU 2017 trade fair.

As part of the “ArKol – development of architecturally highly integrated façade collectors with heat pipes” project, Fraunhofer ISE together with its partners...

Im Focus: How to inflate a hardened concrete shell with a weight of 80 t

At TU Wien, an alternative for resource intensive formwork for the construction of concrete domes was developed. It is now used in a test dome for the Austrian Federal Railways Infrastructure (ÖBB Infrastruktur).

Concrete shells are efficient structures, but not very resource efficient. The formwork for the construction of concrete domes alone requires a high amount of...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

12V, 48V, high-voltage – trends in E/E automotive architecture

10.01.2017 | Event News

2nd Conference on Non-Textual Information on 10 and 11 May 2017 in Hannover

09.01.2017 | Event News

Nothing will happen without batteries making it happen!

05.01.2017 | Event News

 
Latest News

A big nano boost for solar cells

18.01.2017 | Power and Electrical Engineering

Glass's off-kilter harmonies

18.01.2017 | Materials Sciences

Toward a 'smart' patch that automatically delivers insulin when needed

18.01.2017 | Life Sciences

VideoLinks
B2B-VideoLinks
More VideoLinks >>>