Finance for the poor: from microcredit to microfinancial services

Abstract

This paper reviews the achievements of the 'microfinance revolution', through reference to the now extensive literature. It finds that there are many opportunities to improve and innovate. To illustrate this finding, the paper concentrates on examining what we need to know to design and deliver better financial products to the poor, especially the poorest. It argues that financial services for the poor are essentially a matter of helping the poor turn their savings into sums large enough to satisfy a wide range of business, consumption, personal, social and asset-building needs. The range of such 'swaps' should be wide enough to cater for short, medium and long-term needs, and they must be delivered in ways which are convenient, appropriate, safe and affordable. Providing poor people with effective financial services helps them deal with vulnerability and can thereby help reduce poverty. However, the relationship is driven by complex livelihood imperatives and is not simple. Microfinance is not a magic sky-hook that reaches down to pluck the poor out of poverty. It can, however, be a strategically vital platform that the poor can use to raise their own prospects for an escape from poverty. Copyright © 2002 John Wiley & Sons, Ltd.

Sharing, Saving, and Living Well on Less: Supporting Social Connectedness to Mitigate Financial Hardship

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Social efficiency in microfinance institutions

“…They argue that a microcredit policy is much more likely to bring about general welfare effects and economic growth than a policy that starts at the top. Matin et al (2002) discuss how to design and provide the best financial services for the poor. They argue that microcredit contributes to the fight against vulnerability and results on poverty reduction.…”

How the unbanked cope with financial exclusion: Evidence from Pakistan

“…Internal factors leading to financial exclusion include poverty and illiteracy (Kempson and Whyley, 1999), whereas external factors include environmental and structural issues, such as difficulties related to physical access (Panigyrakis et al, 2002;Kempson, 2006). Moreover, financial institutions' biases against the poor can lead to the financial exclusion of low-income groups (Matin et al, 2002). Stigmatization, repression and discrimination all contribute to consumer vulnerability (Hill, 1995;Penaloza, 1995).…”