Global solidarity: Towards a more rational and transparent promotion of microfinance institutions

Microfinance is an anti-poverty strategy that can make a tangible contribution to the Millennium Development Goal. However, with few exceptions, MFIs have not yet reached the scale and outreach necessary for full cost-recovery: they remain dependant on donor grants. Microfinance institutions nevertheless help the poor to cope better with risk, to take advantage of small investment opportunities and reduce their vulnerability. In the absence of microfinance institutions, the poor would be worse off: neither banks nor the State would want to take the place of MFIs.

If there is a case for microfinance as a public good, then it may be timely to lay down the conceptual groundwork for a more rational and transparent public sector support for microfinance institutions that are efficient, poverty-oriented and yet still not fully financially sustainable.

The current research initiative, funded by GIAN (click here) and the EU is carried out in partnership with the Universities of Geneva and Cambridge as well as the Geneva Institute of Development Studies.  It examines over 40 MFIs over the world and seeks to determine:

• the characteristics of an efficient, poverty-oriented microfinance institution;

• the types of subsidy most effective and with least negative externalities"

• transparent and verifiable norms and rules for donor support to microfinance institutions.

For more information, please contact Bernd Balkenhol.