Paper
Enhancing the Resilience of Microfinance Institutions and Programs: Lessons Learned from the Asian Financial Crisis
How do microfinance institutions overcome a macro economic financial crisis?
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26 pages
This paper discusses the Asian Financial crisis and lessons learned from it. It discusses in detail:
- The challenges Asian countries faced during the crisis;
- The policy framework of these countries;
- Macro-level reforms of the policy and legal framework, with focus on Indonesia;
- The pitfalls of deregulation without supervision;
- The origin, development and infrastructure of microfinance in Indonesia;
- The experience of the Philippines.
The paper presents evidence form selected Asian countries to show that:
- Microfinance, on the whole, has weathered the crisis well, especially in Indonesia;
- Demand for, and supply of, micro-credit has been largely unaffected.
The paper finds that the resilience of microfinance can be attributed to the following factors:
- The institutional autonomy and self-reliance of microfinance institutions (MFIs);
- Deregulation of interest rates, institutional liberalization, the provision of appropriate legal forms for MFIs, prudential regulation and effective supervision.
The paper recommends that in times of crisis:
- Governments should:
- Provide an adequate policy and legal environment;
- Assist MFIs in building their own networks.
- Donors should focus on:
- Strengthening the institutional autonomy of MFIs;
- Building apex organizations of MFIs;
- Preventing unnecessary government interventions.
The paper concludes with special suggestions with regard to Indonesia.
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