MFIs wishing to accept and on-lend savings and thereby expand their operations may consider upgrading to the status of a bank, but are often deterred by the regulations involved. This article presents an alternative approach: creating formal banks for microfinance from scratch. Such Microfinance Banks (MFBs) have been created in Albania, Bosnia, Georgia and Kosovo over the past two years, and they have already reached the point at which they are covering their costs and making profits after only two years in operation. They offer deposit accounts, loans and money transfer services.
This article follows on from one in 2001, which dealt with the emergence of a network of microenterprise banks. The German consulting firm IPC has been involved with setting up microenterprise banks 'from scratch', first in Latin America in the early 1990s, and then in south-east Europe, and most recently in Africa. This article describes how IPC formed the investment company, IMI, owned by private and public shareholders, and has made investments in 18 microenterprise banks in the last six years. It argues that having the same shareholders within IMI makes it easier to apply the same business model consistently across all the banks and to transfer knowledge and resources between the banks.