Microfinance and Poverty Reduction

The provision of credit and other financial services has become increasingly seen as the answer to the problems facing poor people. Microfinance interventions have the capacity to increase incomes, contribute to individual and household security, and change social relations for the better. However, it may not be assumed, argue the authors of this book, that they will do so and it may often be more effective in terms of poverty reduction to combine credit provision with other development activities. Considering various types of finance schemes, this text compares the effectiveness of different approaches in aiding poverty reduction. The book emphasizes the importance of first studying the local context, and then considering the macroeconomic factors which may be operating upon the economy of a particular country. Five extended case studies, in the Gambia, Ecuador, Mexico, Pakistan, and the UK are examined with reference to further aspects of sustainability and impact assessment.

Table of Contents:
* Acknowledgements * Introduction 1. Current debates in microfinance * Subsidised credit provision * The move to market-based solutions * Making use of social collateral * Savings Can microfinance interventions reduce poverty? o Poverty as powerlessness o Credit for micro-enterprises o Reaching the poorest * Financial interventions and social change * Treading carefully in microfinance interventions 2. Informal financial services * Introduction User-owned informal financial services o Some examples of user-owned financial services * Turning the informal into the formal * What can be learned from informal finance? * Deciding when and how to intervene o Research questions on existing informal financial services * Filling the gaps o Some examples of innovative services * Promotion: an alternative strategy for NGOs o Formation of savings groups and development of internal credit facilities o Promotion of small-scale formalised approaches o Linking groups to the formal system o Linking with specialised financial service NGOs o Advocacy * Summary and conclusions 3. The design of savings and credit schemes for poor people * Introduction * Targeting savings and credit to poor people * Women as users of financial services * Lending through groups o Functions of the group in microfinance schemes o Including the poorest o Other examples of group-based schemes * Savings o The value of savingd facility o Compulsory or valuntary savings? o Linking savings to credit * Forms of loan o Credit in cash or kind? o Directed or undirected credit? * Loan disbursement and repayment schedules * Interest rates * Integrating financial services with other activities 4. Savings and credit group formation and institution-building 5. Social development programmes 6. Economic development activities 7. Summary and conclusion 8. Financial performance and sustainability * Introduction * Managing and assessing financial performance o The repayment rate o Arreas and default * Financial sustainability o The pros and cons of 'scaling up o Issues in sustainability: the experience of 'village banking' o Sustainability through exstending coverage o Measuring financial sustainabilty * Managerial and organisational sustainability o The role of staff in microfinance interventions o Organisational sustainability and change * Summary and conclusions 9. Assessing impact * Introduction * The difficulties of assessing impact o Establishing loan use o Measuring change: controls and baselines o Proving causality * Innovations in impact assessment o Researching usefulness: a case study o Assessing impact on social relationships o Impact assessment as a dynamic process o Validating quantitative data in impact assessment o Using quantitative data in impact assessment * Learning and adaptability * Summary and conclusions 10. Case studies * Introducing the case studies * Union Regional de Apoyo Campesino (URAC), Mexico o Background o Design o Financial performance and sustainability o Impact assessment o Conclusions * SUNGI Developent Foundation, Pakistan o Background o Design o Financial performance and sustainability o Impact assessment o Conclusions * Ladywood Credit Union, UK o Background o Design o Financial performance and sustainability o Impact assessment o Conclusions * ACTIONAID in The Gambia o Background o Design o Financial performance and sustainability o Impact assessment o Conclusions * Casa Campesina Cayambe, Ecuador o Background o Design o Financial performance and sustainability o Impact assessment o Conclusions * Conclusions * Annex 1 Table 1 Six microfinance institutions * Annex 2 Repayment rate and arrears rate * References