Microfinance Needs To Reach Poor
By EDU LOPEZ
October 26, 2012, 5:32pm
The Asian Development Bank (ADB) has stressed the need for a sustainable
micro-finance assistance to reach more of the poor in Asia and the Pacific.
In a new study, "Micro-finance Development Strategy 2000: Sector
Performance and Client Welfare," ADB, emphasizes the twin goals of
micro-finance — reaching the poor and being financially sustainable.
With microfinance becoming increasingly commercialized in the region,
the study stresses the role of government and agencies such as ADB in
addressing the financial needs of the poor, while at the same time
ensuring the institutional sustainability of micro-finance providers.
"Despite the increasing popularity of micro-finance in recent years,
expanding the access of poor households to institutional financial
services remains a great challenge to governments and development
agencies," says the director-general of independent evaluation, Vinod
Thomas.
The study finds that the penetration of micro-finance among the poor in
Asia and the Pacific remains low. As of the end of 2010, some 20% of the
population living below the poverty level of $1.25 per day had direct
access to microfinance services in 21 developing countries receiving ADB
micro-finance support. This level was below ADB's goals.
Micro-finance is seen in the region as an important means to helping
low-income households take advantage of economic opportunities and
improve living standards. But the degree to which it actually reaches
the poor and improves their welfare is under public scrutiny.
A review of two programs in Pakistan and Viet Nam points to an apparent
trade-off between targeting and effectiveness of micro-finance. Smaller
loans were better at targeting the poor, but less effective than larger
loans in producing welfare benefits.
In the Pakistan program, the average loan was $195 but reached
substantially more borrowers living below the national poverty line than
in the Viet Nam program, where the average loan was $1,972. The study
found more positive direct and indirect welfare benefits in the Viet Nam
program than in the Pakistan program.
The study says that for micro-finance to have a greater impact on
reducing poverty in the region, it needs to better target the poor and
focus more on educating them in using basic financial services, as well
as more effectively link micro-finance services to complementary
pro-poor interventions.
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CARLOS ANI - International Microfinance Consultant - SEEDFINANCE Corporation Chairman
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