Responsible Microfinance

This presentation explores the concept of responsible microfinance. Responsible microfinance has been defined as the best product made available at the lowest price, to as many people, as fast as possible. Current challenges to responsible microfinance include the existence of multiple business models, inadequately regulated microfinance markets that are conducive to theft and abuse by lenders, and uncertainty about appropriate legislation.

Opportunities in this area include positive branding, expanded product lines, legislative and regulatory partnerships, and greater pricing transparency. Responsible microfinance includes:

• Positive branding that makes microfinance more service-oriented;
• Expanding product lines that help poor households manage day-to-day cash flows, borrow for all uses, build savings over the long term, and manage risks;
• Realizing that poor households require more rather than less active financial management;
• Understanding that poor households welcome safe, local, convenient, open-access savings, and use them intensively;
• Legislative and regulatory partnerships that focus on savings, superior governance, strong and expanding capital base, disciplined financial management, and a track record of prudence.

Finally, the presentation discusses issues that MFI managements need to look at with regard to responsible microfinance.