Positive Approaches to Microfinance Commercialization
The performance of microfinance institutions (MFIs) needs to be capitalized and commercialization is the way to move forward. This paper recommends the role of governments, funding agencies, support institutions and MFI themselves for enabling environments to progress towards commercialization.
The paper identifies the following areas of government interventions and suggests strategic approaches to address issues prevailing in the current environment:
- Providing an enabling policy environment;
- Phasing out direct interventions;
- Focusing on grant based approaches to reach the poorest;
- Creating a new legal structure for commercial MFIs;
- Adopting appropriate regulation and supervision;
- Improving the framework for secured transactions.
The paper asserts that funding agencies need to play a role in close coordination with both the government and the MFI at the same time. It lists the following roles for these agencies:
- Supporting an enabling environment ( including regulation and supervision);
- Building MFI capacity;
- Promoting innovation in microenterprise development and assisting development of microfinance industry standards;
- Promoting linkages between commercial banks and microfinance NGOs.
Microfinance institutions play a key role in steering themselves towards commercialization. The paper identifies their role in:
- Balancing commercial and social objectives;
- Increasing cost efficiency;
- Improving institutional capacity.
The paper identifies three microfinance support institutions and discusses possible interventions and strategies that they should adopt. It discusses the following institutions:
- Palli Karma-Sahayak Foundation ( PKSF);
- Credit and Development Forum;
- Credit Information Bureau.
