Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Competition is claimed to be beneficial in development projects promoting micro and small enterprise finance although there are still some doubts whether these loans can be developed into a profitable business. Actually nothing is known about how many MSE banking units optimally should be created and supported in a certain region. Our research aims at shedding new light on this important issue in development finance. We employ a unique dataset from the Small Business Department of the European Bank for Reconstruction and Development for Kazakhstan, and investigate which strategy contributes more to the overall program's success: a strategy of building up several competing banking units targeted at MSE lending or a strategy of establishing regional monopolies.
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Microfinance, formerly celebrated as a most successful development tool, has been confronted with harsh criticism in recent years. It is claimed to have contributed to clients' over-indebtedness while having failed to deliver on its promise of reducing poverty. By reviewing recent evidence, this paper aims for a more realistic assessment of the microfinance approach. It is argued that borrowing always goes along with risk. Accordingly, the danger of over-indebtedness can be ameliorated by responsible finance practices, but never eliminated. Nevertheless, microfinance deserves its place as a development tool. Even if positive impacts are much smaller than claimed in the past, the impact stream is able to flow for as long as the microfinance supplier survives. As there is proof that temporary support can build sustainable institutions, the cost-benefit ratio still seems to speak in favour of the microfinance approach.
For the last two decades, microfinance has ranked high on the list of policy instruments for fighting poverty. Supporting the creation of access to formal financial services for lowincome households holds out the promise of improving the living conditions of poor families and fostering economic development. Furthermore, it is claimed to be a very costeffective approach because some non-governmental organizations ( NGOs) that have been upscaled into microbanks have shown that financial services can be offered to low-income households while covering costs and even earning a moderate profit. Recent studies, however, are sceptical about the high expectations raised by the microfinance approach, since profitable microfinance institutions (MFIs) are the exception rather than the rule.Institutional innovation is called for in order to reproduce these rare successes on a larger scale. This article aims to offer preliminary insights into the potential of two rather new institutional alternatives to upscaling: the creation of microfinance departments at existing for-profit banks (i.e., downscaling) and the founding of greenfield banks.
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