Microfinance institutions in the development of financial markets

Eva Terberger

Revista CEPAL, 2003

Abstract: For the last two decades, microfinance has ranked high on the list of policy instruments for fighting poverty. Supporting the creation of access to formal financial services for low-income households holds out the promise of improving the living conditions of poor families and fostering economic development. Furthermore, it is claimed to be a very cost-effective approach because some non-governmental organizations (NGOs); that have been upscaled into microbanks have shown that financial services can be offered to low-income households while covering costs and even earning a moderate profit. Recent studies, however, are sceptical about the high expectations raised by the microfinance approach, since profitable microfinance institutions (MFIs); are the exception rather than the rule. Institutional innovation is called for in order to reproduce these rare successes on a larger scale. This article aims to offer preliminary insights into the potential of two rather new institutional alternatives to upscaling: the creation of microfinance departments at existing for-profit banks (i.e., downscaling); and the founding of greenfield banks.

Date: 2003-12
Note: Includes bibliography
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ecr:col070:10994

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