Microfinance, Grants, and Non-financial Responses to Poverty Reduction: Where Does Microcredit Fit? (Focus Note No. 20)
Parker, J. & Pearce, D.
Publication Date: 2001
Published by: Consultative Group to Assist the Poor (CGAP)
Document Type: Paper
What else is on the menu of microfinance interventions?
The note addresses five questions:- when is microcredit an appropriate response?
- what is needed for successful microcredit?
- when would savings and other financial services be more beneficial?
- when should grants and other financial entitlements be considered?
- what other interventions can strengthen the livelihoods of the poor?
It finds that there are cases when microcredit is inappropriate based on context, institutional capacity and the presence of substitutes and alternatives. These alternatives can be:- services such as savings and microinsurance
- grants like termination payments and microgrants
- other interventions including improving infrastructure, employment programs, non-financial services and legal/regulatory reform
The note concludes that donors and policy-makers play a critical role in providing flexible and contextual solutions - not just microcredit.
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