The Microfinance Revolution - Vol. 1

The Microfinance Revolution - Vol. 1

The Microfinance Revolution - Vol. 1

The Microfinance Revolution - Vol. 1

Synopsis

Around the world, a revolution is occurring in finance for low-income people. The microfinance revolution is delivering financial services to the economically active poor on a large scale through competing, financially self-sufficient institutions. In a few countries this has already happened; in others it is under way. The emerging microfinance industry has profound implications for social and economic development. For the first time in history, capital is well on its way to being democratized.'The Microfinance Revolution', in three volumes, is aimed at a diverse readership - economists, bankers, policymakers, donors, and social scientists; microfinance practitioners and specialists in local finance and rural and urban development; and members of the general public interested in development. This first volume, 'Sustainable Finance for the Poor', focuses on the shift from government- and donor-subsidized credit systems to self-sufficient microfinance institutions providing voluntary savings and credit services.

Excerpt

This chapter explores the reasons for the “absurd gap” between supply and demand in microfinance. Among the economically active poor of the developing world, there is strong demand for small-scale commercial financial services—for both credit and savings. Where available, these and other financial services help low-income people improve household and enterprise management, increase productivity, smooth income flows and consumption costs, enlarge and diversify their microbusinesses, and increase their incomes. But the demand for commercial microfinance is rarely met by the formal financial sector. One reason is that the demand is generally not perceived. Another is that many actors in the formal sector believe, wrongly, that microfinance cannot be profitable for banking institutions.

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