Microfinance Development Strategy 2000: Sector Performance and Client Welfare

Date: September 2012
Type: Evaluation Reports
ADB administration and governance; Evaluation; Finance
Series: Special Evaluation Studies


Microfinance is seen in Asia and the Pacific as an effective instrument to help low-income households take advantage of economic opportunities and improve living standards. But despite the popularity of microfinance in recent years, the gap in access and use of financial services for the poor remains a great challenge to governments and development agencies. The degree to which microfinance reaches the poor is also the subject of an ongoing public debate.

The Asian Development Bank (ADB), in 2000, approved its microfinance development strategy to set out a strategic framework and broad guidance for its microfinance operations. During 2000–2010, ADB provided $2.8 billion to support microfinance activities in 21 developing member countries in the region through loans, grants, and technical assistance operations.

This study shows that ADB’s microfinance support was relevant and responsive to the sector development needs of developing member countries. Overall, ADB support performed reasonably well in easing regulatory and policy constraints. But it was less than effective in market and institutional development, sustainability of microfinance operations, and outreach to the poor.

Indeed, one of the study’s key findings is that improvements in the policy environment and commercialization of microfinance did not necessarily result in greater outreach to the poor.

The average penetration of microfinance among the poor in countries with ADB support remained low at nearly 20% of the population at the end of 2011. Six case countries—Cambodia, Pakistan, Papua New Guinea, Philippines, Uzbekistan and Viet Nam—showed that fewer than 9% of microfinance clients lived below $1.25 per day and fewer than 22% lived below $2 per day.

Impact evaluations of two ADB microfinance programs—the Rural Enterprise Finance Project for Viet Nam and the Microfinance Sector Development Program for Pakistan—showed that smaller loans (as in the case of the Pakistan program) did better in targeting poor households. However, they were less effective in producing welfare outcomes for borrowers. In the Viet Nam program, which had larger average loan sizes, the study found more positive welfare benefits.

The study recommends that future ADB microfinance interventions targetpoor and low-income households using “deliberate and innovative approaches,” the close monitoring of beneficiaries’ poverty levels and the empowerment of women. It also recommends a more demand-side orientation in microfinance interventions that focuses on client needs to make microfinance more beneficial for the borrowers. 


  • Introduction
  • Portfolio Assessment
  • Sector Performance
  • Client Welfare Impact
  • Conclusions, Lessons, and Recommendations
  • Appendixes
Microfinance Development Strategy 2000: Sector Performance and Client Welfare