Making Microfinance Work in the Middle East and North Africa
Brandsma, J. & Chaouali, R.
Publication Date: 2004
Published by: World Bank
Document Type: Paper
How to ensuring sustainability while financing microenterprises?
This report presents the status of microfinance in the Middle East and North Africa. Introducing the fundamental concepts of microfinance and micro enterprises, the study analyses 60 microfinance institutions (MFIs).
Emphasizing that the poor are bankable and willing to pay a premium for quick, reliable, and convenient financial services, the authors argue that microfinance can be sustainable if it follows four basic principles:
- Covering costs;
- Avoiding subsidies;
- Promoting outreach and demand-driven service delivery;
- Maintaining a clear focus.
The paper argues that only a very small percentage of the microfinance market is being serviced by the existing MFIs. Moreover, the demand for financial services by the poor is largely unmet in the region due to non-adherence to best practices by MFIs. The authors underline the following that need to be addressed by MFIs in order to attain sustainability:
- Reviewing mission statements, goals, and objectives;
- Restructuring and reorienting the staff;
- Building skills with training;
- Modernizing and streamlining systems and procedures.
Based on its analysis, the paper recommends institutional and market solutions to sustainably meet the demand for financial services by the poor:
- Developing more and better microfinance programs by institutionalizing best practices;
- Building capacity for sustainability and outreach by increasing training opportunities;
- Engaging the formal financial sector;
- Developing new microfinance intermediaries;
- Removing legal and regulatory obstacles and creating an enabling environment.
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