Scaling up Microfinancial Services: An Overview of Challenges and Opportunities

This paper identifies strategies for scaling up. The paper finds the following as impediments to scaling up microfinancial services:

• High transaction costs incurred to serve the poor;
• Adverse risk selection and moral hazard problem;
• Lack of appropriate delivery structures.

The authors feel that the outreach of micro financial services can be improved by:

• Strategic partnerships between formal financial service providers and MFIs and NGO that provide microfinance;
• Risk sharing between banks and MFIs that have operational capabilities to provide microfinancial service;
• Leveraging technology to expand the base of microfinance service provider;
• Bundling credit with other risk management instruments such as insurance;
• Accessing capital markets for funds.