Microlending in Germany: A Case Study on DMI

This study looks at the present situation of micro lending in Germany and analyzes the German Microfinance Institute (Deutsches Mikrofinanz Institut, DMI) as a case study. It tries to answer the question whether micro lending in Germany can be sustainable and have a substantial outreach at the same time. The paper:

• Gives an overview of microfinance and its best practices in developing countries;
• Assesses the situation in Germany in general;
• Studies the case of DMI in detail;
• Compares its findings with the experience in developing countries.

The author concludes that:

• Replicating microfinance in Germany is not easy;
• The role of microfinance, which is gradually becoming established, must be to facilitate access to credit and enable target groups to undertake self-determined employment and income opportunities;
• Mixing social intentions with business needs in lending is an obstacle to outreach and sustainability; this is reflected by the DMI model too.
• There is a need to:
  • Develop incentives within institutions;
  • Reduce costs by reducing operational expenses, loan losses and costs of funds.
• DMI has been active in innovations and scientific research;
• Close attention must be paid to the design of suitable, demand-driven products;
• Although lessons can be learnt from developing countries, micro lending cannot simply be replicated and must be adapted to the German context.