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Annual Report 2002 : Operational Priorities and Performance

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Rural and microfinance

Asia’s rural financial markets need to be improved to meet the challenges of the 21st century, according to an ADB-funded study published in 2000 (see http://www.adb.org/Documents/Books/Rural_Asia/Rural_Financial_Markets/). Given this, and the fact that two thirds of the world’s poor live in Asia and the Pacific and about 60% of the region’s total population live in rural areas, ADB continued in 2002 to emphasize the development of rural financial services.

ADB’s goal in the sector is to ensure that rural households have permanent access to a broad range of sustainable financial services. Recognizing the correlation between rural finance and broad-based, inclusive rural development in reducing poverty, ADB placed integration of rural and microfinance with the broader financial system at the core of its strategic thrusts and adopted the financial system development approach in its rural and microfinance operations.

ADB focuses on three broad strategic areas in its rural and microfinance operations: creating an enabling policy environment; building the financial infrastructure necessary for improving rural and microfinance services; and strengthening rural and microfinance institutions.

ADB held workshops in 2002 in Bangladesh and the Philippines to improve DMC understanding of the commercialization of microfinance, and began publishing the study results (see http://www.adb.org/Documents/Reports/Commercialization_Microfinance/BAN/).

In partnership with other funding agencies to support the development of microfinance services, ADB continued to assist the Consultative Group to Assist the Poorest (CGAP) (see http://www.adb.org/Documents/TARs/REG/tar_oth35011.pdf).

A highlight of ADB’s rural and microfinance sector operations in 2002 was its participation in the voluntary donor peer review of microfinance operations, a program initiated by the CGAP and the Government of the United Kingdom to help funding agencies improve the effectiveness of their microfinance assistance. ADB was among the first six funding agencies to volunteer for the review. An international multi-donor team of microfinance experts reviewed ADB’s microfinance operations in July. Recommendations were made available to the public shortly after. ADB also participated in the review process with the United Nations Development Programme and the United Nations Capital Development Fund in October.

Following its policy to support aid coordination, ADB assisted in formulating CGAP’s new strategy and charter. The new strategy encompasses a vision in which the poor will have permanent access to a wide range of financial services, including savings, payment services, and insurance. ADB, together with CGAP, cosponsored a staff training program in microfinance in Manila in December 2002. In addition, ADB participated in several international events on microfinance organized by Inter-American Development Bank, International Finance Corporation, and United States Agency for International Development.

Recognizing the importance of disseminating good practices and improving knowledge to develop a sustainable microfinance industry, ADB continued to publish its quarterly newsletter on microfinance—Finance for the Poor—both in print and on its web site (see http://www.adb.org/Documents/Periodicals/Microfinance/).

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