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Globalization and gender - dilemmas for microfinance organizations
01.09.1999
The microfinance industry is itself becoming a global phenomenon. The proliferation of microfinance programmes - and in particular of a single loan product - has been accelerated by a global publicity campaign, the MicroCredit Summit. Women were to be targeted, but it is clear that women do not always benefit from credit for microenterprise. This article examines the circumstances of women microentrepreneurs - and finds that some of them are powerless home workers. It also examines the financial products aimed at them - and calls for more products, such as savings accounts, money transfers, or loans for domestic equipment. Also, as microfinance organizations (MFOs) develop and as the sector moves to embrace mainstream financial institutions, it is increasingly difficult to ignore the role of international capital markets. There is a need for 'patient capital' which will be rooted in and respond to local concerns. Financial services should be delivered as effectively and efficiently as possible, but subsidies may continue to be a necessary component in achieving this. Finally, it is argued that although NGOs may continue to provide only a small proportion of the financial services available, they should continue to play a strategic role in their development. -
The managed ASCA model – innovation in Kenya's microfinance industry
01.06.2002
A model of microfinance has been operating in the Central Province of Kenya since the early 1990s largely unnoticed by donors. The model involves the mobilization of women into accumulating savings and credit associations by local NGOs that assist in the management of the fund in return for a management fee. The approach was developed in the early 1990s as a result of the withdrawal of donor support to traditional women's group activities and the local NGOs are now entirely self-supporting. The outreach of the services is comparable to the main donorfunded initiatives and evidence suggests that depth of outreach to poorer people may in fact be better. This paper describes the model and explains its apparently successful performance. However, the analysis also suggests that the model has inherent weaknesses, especially in default management, that need to be addressed if its success is to continue. -
Tackling the 'frontiers' of microfinance in Kenya: the role for decentralized services
01.09.2006
Formal microfinance organizations have difficulty extending their services to remote rural areas in Kenya, as elsewhere in Africa. This article proposes to map the frontiers of microfinance in Kenya based on poverty incidence and population density. It then presents a spectrum of centralized and decentralized models, from banks to MFIs, SACCOs, ASCAs and ROSCAs. The more decentralized models, which involve greater user-ownership and management, have the potential to provide services to poorer people and in rural areas due to inherently lower cost structures and key characteristics of their services, despite many challenges to their long-term effectiveness and sustainability. Five organizations in Kenya that are reaching into rural areas are analysed to explore where the frontiers lie. It concludes by discussing potential strategies for the improvement of decentralized services as the 'bottom up' spike of a two-pronged approach which complements centralized service delivery. -
Village Savings and Loan Associations: experience from Zanzibar
01.03.2007
The continuing failure of MFIs to reach remote and rural areas, especially in Africa, has renewed interest in finding alternative models of service delivery that can achieve this goal. The Village Saving and Loan Association model promoted by CARE is an accumulating savings and credit association that is timebound, with a periodic action audit at which all the funds are paid out. The approach was implemented in Zanzibar in 2001–2002 and CARE then left the area. This article reports findings from a follow-up study to assess the performance of the groups. The number of groups had grown and overall outreach had expanded to some 4,500 members. The financial performance of the groups was strong with returns on savings of 53 per cent. The context for this strong performance is a relatively well-off and well-educated population that is likely to have favoured strong group governance. -
Reviews and resources
01.03.2009
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Social Protection in Africa
01.06.2009
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Microfinance is dead! Long live microfinance! Critical reflections on two decades of microfinance policy and practice
01.12.2009
The rise of the financial systems approach has been central to the past two decades of microfinance practice which aimed to achieve sustainability through scale and building profitable institutions. This resulted in extensive debates over its ability to reach poor and very poor people. The approach rode the wave of the Washington Consensus which promoted economic reform and liberalization. Now the policy discourse has moved even further away from a poverty focus to advocate financial inclusion for the unbanked into the mainstream financial sector. On these terms microfinance seems to be dead. However, the diversity of approaches on the ground aimed at poor people and hard-to-reach rural areas, points to a survival of ‘microfinance’, albeit largely outside the mainstream of the Washington consensus. This article also discusses where these developments leave the women's empowerment agenda that has been so central to microfinance.