Microfinance: It's More than Little Loans

This presentation examines the role of microfinance in value chains. It states that microfinance clients are economic actors. Microfinance is neither a separate financial system, nor merely credit. Ensuring sustained access to financial services requires a multi-level approach. Microfinance clients, however, do not necessarily contribute to or benefit from economic growth.

Development is hastened when the economically active poor contribute to and benefit from economic growth. Microfinance can work with banks, credit unions, non-bank financial companies, and NGOs where poor households are active. Microfinance products and services are being adapted to meet demand arising from diverse areas such as rural and agriculture finance, youth, education, housing, remittances, conflict situations, and coping with HIV/AIDS.

Finally, three levels where microfinance needs to be strengthened are at the levels of the provider, infrastructure and enabling environment. This can be done by:

• Linking formal institutions to family and friends;
• Linking financial institutions to industry actors;
• Developing diverse infrastructural support;
• Creating an enabling environment that is stable, safe, efficient, and fair.