Case study on best practices aimed at popularizing micro-financing

Abstract

The practice of micro-finance for the poor has evolved from a credit base, expanding into a range of other financial services that poor people need to pull themselves out of poverty and into the mainstream of development. The MFIs have gone beyond credit and provide savings. A few offer other financial services, such as various forms of insurance and family budgeting services. In a similar vein, the range of lending products on offer to poor people has expanded. Likewise the number of clients that have graduated beyond the poverty line, but continue to be borrowers, numbers in the millions across Asia. The importance of micro-finance for the alleviation of poverty is widely recognized by international organizations and development scholars. Access of the poor to financial services is believed to enhance their opportunities for economic development, although opinions differ as to the exact transmission mechanisms on the household or micro-economic level. The study gives an overview of the importance of the micro-financing segment of the financial service industry before going into its typology. Then, after a thorough analysis of the micro-financing activities in the selected countries, the study builds on and discusses the major constraints of micro-financing, applicability of the Grameen Bank experience to some countries and the lessons learnt.