Finance for the Poor: Microcredit to Microfinancial Services
This paper examines the achievements of the microfinance sector through an extensive review of literature. It finds that there are many opportunities to improve and innovate the delivery of financial services to the poor.
- Business needs for diversifying livelihood opportunities;
- Consumption needs;
- Personal and social needs related to lifecycle events;
- Asset-building needs.
The range of microfinancial services, which enable cash flow smoothening for poor, should be wide enough to cater for short, medium and long-term needs, and they must be delivered in ways which are:
- Convenient;
- Appropriate and accessible;
- Safe and affordable.
Providing poor people with effective financial services helps them deal with vulnerability and thereby helps reduce poverty. The relationship between poverty and access to financial services is driven by complex livelihood imperatives and is not simple. The paper concludes that while 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.
