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p. 2 of 24 BACK | NEXT Introduction Need for a Development Strategy for Microfinance Microfinance in the Asian and Pacific Region ADB’s Microfinance Experience Other Agencies’ Microfinance Experience ADB’s Microfinance Development Strategy Implementation of the Strategy

Microfinance Development Strategy

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Need for a development strategy for microfinance

During 1988-1998, ADB approved 15 microfinance projects totaling about $350 million, 6 projects with microfinance components valued at about $53 million, and 34 technical assistance activities for about $18 million to support microfinance operations. ADB has, however, provided this assistance without a well-defined strategy and, as a result, has not been able to fully harness the potential of microfinance for poverty reduction.

Once almost exclusively the domain of donors and experimental credit projects, institutional microfinance has evolved during the last decade into an industry with prospects for financial viability, offering a broader range of services and significant opportunities for expansion. The prospects for financial sustainability are revolutionizing the microfinance field and suggest that a large proportion of the millions of poor people can be provided access to institutional microfinance.

This change has important implications for ADB. ADB needs to take cognizance of the challenges and prepare to effectively harness the opportunities in its DMCs. Given the diverse requirements in the sector, the competing demands for ADB funds, the increasing pressure on resources in the Asian Development Fund, and the growing complexities and challenges of improving the quality of life of over 900 million poor people in the Region, ADB must reinforce its emphasis on efficient allocation and use of resources at its command. A strategy is necessary to ensure that ADB addresses these concerns effectively and consistently within its objective of poverty reduction. A strategy can also (i) provide a clear and consistent link between ADB’s microfinance operations and its overarching objective of poverty reduction; (ii) facilitate promotion of a common approach to microfinance operations throughout ADB, which will also contribute to better coordination with other funding agencies; (iii) provide a consistent basis for policy dialogue with the DMCs on microfinance and related issues; (iv) assist ADB’s ongoing efforts to improve the quality of project design, processing, and implementation of microfinance operations; and (v) facilitate adoption of a longer term perspective than in the past in providing assistance for microfinance.

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