Expert Group + 10: Building Domestic Financial Systems that Work for the Majority

This report examines the achievements and challenges of microfinance and presents a plan to increase its outreach. The report states that:

• Microfinance has expanded rapidly in terms of actors, services, performance indicators and standards, regulations and infrastructure;
• Increasing the outreach of microfinance needs a strategy that includes the entry of specialized MFIs, commercial banks and cooperatives;
• There is a need for:
  • MFIs to reinforce their connection with low-income clients and build alliances to offer savings products;
  • Banks to stay away from consumer and transaction finance;
  • Cooperatives to build better management and stronger lending products;
  • Reduction in transaction costs and expansion of outreach through technology applications and risk assessment methods.

The report provides a road-map for country-level stakeholders such as policy-makers, MFIs, banks, etc. that focuses on the following five levels of action:

• Regulations and legal structures that work for microfinance;
• Institutional infrastructure;
• Financing instruments and arrangements;
• Retail capacity;
• Products and processes.

The report concludes by recommending key areas of action for microfinance to realize massive expansion in outreach, product offering and impact over the next ten years. These include the building of:

• Retail capacity thorough MFIs, banks, cooperatives and new channels,
• Depth and diversity of products,
• Domestic and financial markets and industry infrastructure,
• Permanent state policies and country strategies for microfinance.