Microfinance in Asia and the Pacific: 12 Things to Know

Giving the poor access to affordable financial services enables them to seize livelihood opportunities, manage cash flow spikes, and mitigate risks. Here are 12 things to know about microfinance.

  1. About 2.7 billion people worldwide, or 70% of the adult population in the world’s developing countries, have no access to formal financial services, such as savings or checking accounts.
    Source: Independent Evaluation news Greater Focus on the Poor Key to Effectiveness of Microfinance in Asia and the Pacific
  1. Microfinance refers to the concept of providing poor and low-income households with affordable financial services, including savings, loans, remittances, payments, and insurance.
    Source: ADB's work to develop the financial sector
  1. There are three types of sources of microfinance: formal institutions (i.e., rural banks and cooperatives), semiformal institutions (i.e., nongovernment organizations), and informal sources (i.e., money lenders and shopkeepers).
    Source: ADB's work to develop the financial sector
  1. The microfinance revolution provided loans to the poor by requiring social collateral in place of physical assets. It has grown into a $70 billion industry with an estimated 200 million clients.
    Source: Consultative Group to Assist the Poor (CGAP) website
  1. Microfinance aims to reach out to poor clients, women in particular. However, the poorest segment of the population does not form the majority of microcredit clients because of lack of opportunity or ability to generate cash flow for loan repayment.
    Source: CGAP Microfinance Gateway
  1. The average penetration of microfinance among the poor in countries with ADB support remains low at nearly 20% of the population at the end of 2011.
    Source: Independent Evaluation report Microfinance Development Strategy 2000: Sector Performance and Client Welfare
  1. There is a need to link microfinance services to complementary pro-poor interventions, such as livelihood programs, food aid, skills training, and asset transfers that help people in extreme poverty to become economically active and creditworthy.
    Source: Independent Evaluation news Greater Focus on the Poor Key to Effectiveness of Microfinance in Asia and the Pacific.
  1. There is ongoing public debate over the effectiveness of microfinance in reaching the poor and improving their welfare. A review of ADB's microfinance programs in Pakistan and Viet Nam shows that smaller loans are better at targeting the poor but not as effective as larger loans in producing welfare benefits.
    Source: Independent Evaluation news Greater Focus on the Poor Key to Effectiveness of Microfinance in Asia and the Pacific
  1. Technology-based solutions, such as mobile phone and internet banking, payment cards, and electronic money, can help microfinance institutions reduce operating costs and expand the reach of their services.
    Source: Independent Evaluation news Greater Focus on the Poor Key to Effectiveness of Microfinance in Asia and the Pacific
  1. Other trends in microfinance include greater attention to consumer protection and financial education, and renewed emphasis on the social mission of the industry. The microfinance community is aware more than ever of the imperative to pursue a double bottom line: both social and financial.
    Source:  Smart Campaign
  1. ADB is one of the largest providers of microfinance support in the Asia and Pacific region. As of 31 December 2012, ADB's total microfinance approvals amounted to $2.59 billion.
    Source: ADB Microfinance Portfolio
  1. Over two-thirds of ADB's microfinance portfolio supported the creation of an enabling policy environment for microfinance in recipient countries.
    Source: Independent Evaluation news Greater Focus on the Poor Key to Effectiveness of Microfinance in Asia and the Pacific

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