Paper

From Recipients of Reparation Payments to Shareholders of Microfinance Institutions: A Study of the Possible Relations between Reparations for Victims of Human Rights Abuses and Microfinance

Can MFIs provide the necessary institutional framework for a sustainable impact on such recipients?
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This paper argues that institution building is the only method by which victims of civil rights abuses can be allocated reparation benefits on a sustainable basis.

It identifies three ways in which microfinance institutions (MFIs) can provide the institutional framework for sustainable impact - by offering:

  • A secure place for the accumulation of savings;
  • Credit for investments and working capital to small and micro entrepreneurs;
  • The recipients of reparation the opportunity of rehabilitating or constructing MFIs.

The paper argues that:

  • Financial relations between MFIs and their customers should be based on commercial principles;
  • For sustainable impact, the following conditions must be met:
    • Investment of payments in income-generating opportunities,
    • Access to deposit-facilities and credit,
    • The repayment of loans on time.
  • Non-government organizations (NGOs) need to be upgraded to formal financial institutions;
  • Support should be given to locally owned financial institutions that may be co-owned by recipients of reparation payments in the following ways:
    • Upgrading informal financial institutions,
    • Establishing new ones,
    • Linking formal and informal finance.

The paper presents examples that demonstrate each of these strategies. It concludes by discussing the role of NGOs as promoters of good practices.

About this Publication

By Seibel, H.
Published